Mersey Docks & Harbour Board v. Coggins & Griffiths (Liverpool) Ltd.

[1947]
Master/servant relationship persons who must be protected. Direct control, only if control over what work and how it is done. Facts Coggins and Griffiths hired a crane and driver from the Mersey Docks and Harbour Board. The driver, Mr Newall, drove the crane negligently and trapped Mr Mcfarlane injuring him. The contract between the Board and the hirers stated that the driver was to become their employee for the duration of the hire. The question was whether the Board were liable to Mr Mcfarlane as Mr Newalls principal employers or whether the hirers now bore responsibility. It was held as a fact that the hirers had power to control what Mr Newall lifted with the crane but not how he lifted it. The Decision Control over Mr Newall's work had not passed to the hirers. It is not to be held that control had readily passed. Only if there is control over what work the person does and how he does it will control be held to pass. The trial judge awarded damages against the appellants. An appeal against this decision was dismissed. The Board appealed to the House of Lords. The appeal was dismissed. Note Lord Macmillan: "That the crane driver was in general the servant of the appellant board is indisputable. The appellant board engaged him, paid him, prescribed the jobs he should undertake and alone could dismiss him." The person hiring the crane had some control but the real control was with Mersey Docks. The ultimate control is the right to dismiss. A servant is one who is subject to the orders and control of an employer .... whether or not the persons are running their own business.

Massey v Crown Life Insurance Company

Point at issue This case involved a claim for unfair dismissal under the Trade Union and Labour Relations Act 1974. Mr Massey could only have succeeded if it was found that he was employed under a contract of service. Facts Mr Massey was the manager of a branch of the Crown Life Insurance Company of Canada (the company). From 1971until 1973, he was an employee of the company. It paid him wages from which it deducted tax, NICs and graduated pension contributions. He also made contributions to the firms pension scheme. In 1973, by mutual consent, the company engaged him on a self-employed basis under a new agreement. His duties under this new agreement were almost identical to those under his previous contract of service. The only real differences were that he no longer made pension contributions and the company paid him gross without any deductions for tax etc. This arrangement continued until 1975 when the company dismissed him. Mr Massey then claimed unfair dismissal. Decision The Industrial Tribunal decided that Mr Massey was not employed under a contract of service and therefore could not claim unfair dismissal. The EAT upheld this decision, as did the Court of Appeal. Commentary In giving the leading judgment of the Court, Lord Denning M.R. stated: The law, as I see it, is this: If the true relationship of the parties is that of master and servant under a contract of service, the parties cannot alter the truth of that relationship by putting a different label upon itOn the other
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hand, if their relationship is ambiguous and is capable of being one or the other, then the parties can remove that ambiguity, by the very agreement itself which they make with one another. The agreement itself then becomes the best material from which to gather the true relationship between them. Lord Justice Lawton commented similarly. He stated: It is clearly established that the parties cannot change a status merely by putting a new label on it. But if in all the circumstances of the case, including the terms of the agreement, it is manifest that there was an intention to change status, then in my judgment there is no reason why the parties should not be allowed to make the change. This case illustrates that the label the parties put on their relationship does not determine the employment status. However, where the factors point equally to a contract of service and a contract for services, the mutual intention of the parties will be decisive. Lord Dennings view was adopted by Lord Justice Stephenson in the later case of Young and Woods Limited v West (1980) IRLR201 to show that a false label had been used in Mr West's engagement as a sheet metal worker. As a general rule the Courts have attached greater significance to an expression of intention where they have confidence in the bona fides of the parties than they have where there is suspicion of concealment or misrepresentation. When all the facts have been gathered, it is then necessary to stand back and look at the bigger picture. If the case is borderline, it is then, and only then, that the intentions of the parties are considered. Where there is mutual intention for a contract of service or for a contract for services, that will determine the status of the worker.

IN THE SUPREME COURT OF JUDICATURE THE COURT OF APPEAL (From: Mr. Justice Boreham - Leeds) Royal Courts of Justice 22nd July 1976 B e f o r e: LORD JUSTICE MEGAW LORD JUSTICE LAWTON and LORD JUSTICE BROWNE ____________________ MICHAEL JOSEPH FERGUSON -vJOHN DAWSON & PARTNERS (CONTRACTORS) LIMITED ____________________ (Transcript of the Shorthand Notes of The Association of Official Shorthandwriters, Ltd., Room 392, Royal Courts of Justice, and 2 New Square, Lincoln's Inn, London, W.C.2) ____________________ Mr. OLIVER POPPLEWELL, Q.C. and Mr. CHRISTOPHER HOLLAND (instructed by Messrs. Ward Bowie, Agents for Messrs. John King & Co., York) appeared on behalf of the Appellants (Defendants). Mr. ROY BELDAM, Q.C. and Mr, ROGER HUNT (instructed by Messrs. Crombie, Wilkinson & Robinson, York) appeared on behalf of the Respondent (Plaintiff). ____________________

HTML VERSION OF JUDGMENT ____________________ LORD JUSTICE MEGAW: On 19th April, 1972, the plaintiff, Mr. Michael Joseph Ferguson, fell some 15 feet from a flat roof on which he was working. He suffered serious injuries. He claimed damages for breach of statutory duty from the defendants, John Dawson & Partners (Contractors) Ltd. The action was heard by Mr. Justice Boreham in the Crown Court at Leeds. On 28th July, 1975, the learned judge gave judgment for the plaintiff for 30,387.88, including interest; The defendants appeal on issues as to liability. There is no appeal as to the amount of damages. The facts of the accident are not in dispute. The defendants were contractors who had undertaken building operations for the extension of a shop building in Walmgate, York. The work had involved the use of scaffolding erected on a flat roof. The scaffolding, after that part of the work had been finished, was taken down. The day after it had been taken down the plaintiff was ordered by Mr, Murray, the defendants' site agent, to remove some 12 or 14 scaffold boards which had been left on the flat roof. There was also some rubble on the roof. The plaintiff was to throw the scaffold boards over the edge of the flat roof to the ground below. He had thrown down 2 or 3 boards. When he was engaged in throwing down another board, he stumbled and fell off the flat roof. There was no guard rail on the flat roof. Regulation 28 (1) of the Construction (Working Places) Regulations, 1966, so far as is relevant, provides: "Guard rails and toe-boards at working platforms and places. Every side of a working platform or working place, being a side thereof from which a person is liable to fall a distance of more than 6 feet 6 inches, shall,.., be provided with a suitable guard rail or guard rails of adequate strength to a height of between 3 feet and 3 feet 9 inches above the platform or place,..." Regulation 3 (1) (a), so far as is relevant, reads:

"It shall be the duty of every contractor, and every employer of workmen, who is undertaking any of the operations or works to which these Regulations apply - (a) to comply with such of the requirements of the following Regulations as affect him or any workman employed by him, that is to say, Regulations 6 to 23, 25, 30, 31, 32, 36 and 38 and, in so far as they relate to the falling or slipping of persons, Regulations 24, 26, 27, 28, 29, 33, 34 and 35...." The learned judge held, contrary to the defendants' submissions: (i) that the plaintiff was employed by the defendants so that the defendants owed to him the statutory duty comprised in regulation 28 (1); and (ii) that the place where the plaintiff was working when the accident happened, the flat roof, was a "working place" within regulation 28 (1). The defendants appeal on each of those issues, I propose to deal first, out of logical order, with the second of those issues. The defendants have at all times conceded that this flat roof in all its characteristics except one would be a working place within the regulation. The one essential characteristic which is said to be missing is the length of time for which the place was going to be used by the plaintiff for the purposes of the work which he had been required to do. The authorities Gill v. Humberstone (1963) 1 Weekly Law Reports 929, a decision of the House of lords, and Kelly v. Pierhead Ltd. (1967) 1 Weekly Law Reports 65 and Boynton v. Willment (1971) 1 Weekly Law Reports 1625, decisions of this Court, say that a necessary characteristic of a working place is that it is to be used for work for "an appreciable time". The defendants say that the intended use here, namely the removal from the roof and the throwing to the ground of 12 or 14 scaffold boards, did not involve work at this place, on the flat roof, for "an appreciable time" The judge held on the evidence that that work would have taken about 10 or 15 minutes. The judge, in error, thought that the plaintiff's instructions had included also the removal of rubble from the roof. But in my judgment that mistake does not matter. In any ordinary use of the word "appreciable", which word is accepted by both parties as being the relevant adjective, the 10 or 15 minutes required for the plaintiff's intended work was an
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appreciable time, I do not find it necessary to consider the further submission by Mr. Beldam for the plaintiff that the evidence indicates that there must have been a substantial period of time during which work was being carried out, though not by the plaintiff himself, on this flat roof on the previous day and also on the morning of the accident. Mr. Popplewell submits that the plaintiff cannot rely upon such work by other persons to whom no duty may have been owed by the defendants. But the 10 or 15 minutes is an appreciable time. The appeal on that issue fails. I turn to the other issue. Was the plaintiff employed by the defendants? For the plaintiff it is submitted that he was employed by the defendants under a contract of service. For the defendants it is contended that the contract was a contract for services, and therefore the defendants were not under a statutory duty to him to provide a guard for the working place. For if it were a contract for services the plaintiff would not have been "employed" by the defendants; and in the circumstances of this accident regulation 3 (1) (a) would not have brought regulation 28 (1) into effect so as to impose on the defendants a duty towards the plaintiff. Regulation 28 (1) is brought into operation only in relation to "the falling or slipping of persons" (which this accident was) so far as the requirements of that regulation "affect....any workman employed by him": "him", here, being the defendants. Regulation 3 (1) (b) has a wider scope as regards the persons who are under the duty; but it is confined to "the falling of materials and articles". It is conceded by the defendants that if the plaintiff was employed under a contract of service, they were, subject only to the issue as to "appreciable time", under a duty to the plaintiff; they failed to carry out that duty; and that failure was the cause of the accident. But, say the defendants, the plaintiff was employed under a contract for services: he was "self-employed": he owed a salutatory duty to himself to take the statutory precautions (Smith. v. Wimpey Bros. (1972) 2 Queen's Bench 329). It was for him, under the regulations, not for the defendants, to ensure that the guard rail was erected. The defendants were under no such duty.

What is the basis for that contention? The judge accepted the evidence given by Mr. Murray, the defendants' site agent, as to the circumstances in which the plaintiff came to work for the defendants in January, 1972, some three months before the accident happened. The evidence was simply this: the plaintiff came with four other Irishmen, already working for the defendants, and he asked, or perhaps one of his friends asked, if he could "come along". Mr.Murray's evidence is: "I said he could start on Monday and that was it. But I did inform him there were no cards; we were purely working as a lump labour force". Mr. Ferguson gave a false name, Goff. That was the name by which he was known to Mr. Murray. That was the name in which he signed at least some receipts for the moneys paid to him weekly -referred to by Mr. Murray in evidence as "his wages". The evidence showed that, as was no doubt intended as a feature of the so-called "lump", the defendants did not make deductions in respect of income tax from the weekly payments to the plaintiff; nor did they make any payments in respect of insurance contributions. They did not have his insurance card, nor his tax form, known as P.45. It is fair to the defendants to say that this engagement of the plaintiff, in January, 1972, whatever its legal effect, was made some months before the provisions of section 28 of the Finance Act, 1971, came into effect. When those provisions came into force on 1st April, 1972, the defendants thereafter, up to the time of the accident, deducted 30 per cent, from the sums due to the plaintiff, since he did not have a certificate, as specified in the Act, entitling him to exemption from P.A.Y.E. deductions. In the circumstances, although neither party has raised, or wishes to raise, any issue as to possible illegality arising in particular out of the judge's reference to the plaintiff's use of a false name in conjunction with the facilities afforded by "the lump" as being "a thoroughly dishonest device" for the purpose of evading his tax liabilities we thought it right to raise the question on our own initiative. However, I think Mr. Beldam is justified in his submission that, however suspicious the facts may appear - and they are indeed gravely suspicious - it would not be right for this Court to hold affirmatively that there was here dishonesty
8

which would affect the contract, whatever it was, with illegality. Mr. Beldam stresses that the plaintiff has not been given the opportunity to answer any questions suggesting such dishonesty. He was not crossexamined on that topic. The defendants did not seek to raise it. The judge asked no questions about it. In those circumstances we did not think it necessary to consider further arguments which Mr. Beldam would have wished to present, if the Court had held that there was here illegality affecting the contract, to the effect that in the circumstances such illegality of the contract or dishonesty of the plaintiff ought not to affect the plaintiff's right of recovery for a breach of statutory duty by the defendants, even though the defendants were themselves innocent of any complicity in the dishonesty and illegality. Moreover, if dishonesty and illegality were to be an issue, it would have been for consideration whether questions of possible complicity by the defendants might not also have been relevant to any decision as to the legal consequences. That question, again, was not raised with any witness, and it would be wrong, on the material which is available, that the defendants should be held, or assumed, to have been themselves dishonest, or to have connived at dishonesty of the plaintiff. I return to the question of the plaintiff's status: was he employed under a contract of service or a contract for services? The defendants' argument is largely founded on the passage in Mr. Murray's evidence which I have quoted already, and on the judge's exposition (not based on anything specifically contained in the evidence) of the meaning of that passage. The judge as a result of that evidence, rejecting completely the plaintiff's evidence to a different effect, held that the plaintiff "regarded himself as working on the lump". The judge then says (at page 36/F of the transcript of the judgment): "I am satisfied that the plaintiff and the defendants regarded the plaintiff as 'selfemployed labour only sub-contractor' and in this there were advantages for each side". The judge then summarises those advantages, which included, for the defendants, escaping liability for payment of Selective Employment Tax in respect of the plaintiff; and for the plaintiff, evading, as the judge thought, his liability for income tax.

The defendants say that the judge has thus held that the contract is to be treated as though it contained an express term by which both parties had agreed that the plaintiff's relationship to the defendants - his status in the work which he would do on the defendants' behalf - would be "a self-employed labour-only sub-contractor". There are no other contractual terms, the defendants say: or, at least, no admissible evidence of any other contractual terms. That, say the defendants, is the end of this case; it is the end of any claim by the plaintiff in respect of breach of statutory duty by the defendants; for by agreement between the parties - the only-agreement between them - the plaintiff was selfemployed. If he was self-employed, say the defendants, he was not employed by the defendants. So regulation 3 (1) (a) did not put the defendants under a regulation 28 statutory duty to the plaintiff to see that guard rails were erected at the working place. That duty was the plaintiff's own duty. The judge rejected that argument. He said (I quote from the transcript of the judgment at page 38/F): "For the plaintiff it is contended that I must look at the realities of the situation and not to the form alone, and particularly not alone to the label that was put upon the plaintiff by both plaintiff and defendant, for it is contended that the form may be, and in this case is, a mere facade; whether or not the plaintiff regarded himself, whether or not the defendants regarded him, as 'self-employed labour only contractor', may be a matter, a serious matter, to be taken into consideration, but it is by no means conclusive, and the question remains whether in reality the relationship of master and servant existed". The judge then considered various authorities and in particular the judgment of Mr. Justice MacKenna in Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance (1968) 2 Queen's Bench 497. Applying the tests and criteria suggested in that case to the realities of the plaintiff's employment as, in the judge's view, they had emerged in evidence in this case, the learned judge arrived at the following conclusion (I read from page 44/B of the transcript of the judgment): "I accept what the parties accept, namely, the label, as a guide and no more. I regard the concept of 'the Lump' in the circumstances
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of the present case as no more than a device which each side regarded as being capable of being put to his own advantage in a manner that I have attempted to describe earlier in this judgment, but which in reality did not affect the relationship of the parties or the performance of the substance of the contract between them". The judge was in my opinion right in his approach and in his conclusion. Certainly it had not crossed Mr. Murray's mind that by reason of anything he had said he had altered the obligations which the defendants would have had for the safety of workmen on their site, as compared with what those obligations would have been apart from his reference to "the lump". In cross-examination, Mr. Murray seems to have had no hesitation in accepting that he (on behalf of the defendants) was responsible for providing scaffold guard rails and toe boards and that sort of thing for the safety of labourers on the site. But, of course, Mr. Murray may have been mistaken about the legal effect of the words which he used. The defendants, as I have said, contend that the contract which governed the legal relationship between the plaintiff and the defendants for the three months up to the time of the accident was a single-term contract. The single term, derived from Mr. Murray's words "I did inform him that there were no cards, we were purely working as a lump labour force", was that the plaintiff's status vis-a-vis the defendants was to be, or was to be deemed to be, "a self-employed labour-only subcontractor". I shall assume for present purposes, though counsel for the plaintiff was not disposed to accept the assumption, that this is a correct interpretation of the intended, and understood, meaning of the Delphic words which were spoken by Mr. Murray and tacitly accepted by the plaintiff. I am not, however, prepared to accept the defendants' further contention that there were no other terms of the contract. Indeed, if there were no other terms, the only conclusion in law, I think, would be the absurd conclusion that there was no contract at all during the 3 months in which the plaintiff was working for the defendants. Counsel
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for the defendants, when this was put to him, was disposed to accept that there must have been a contractual term as to remuneration. There must, as I think, have been many other contractual terms, also necessarily to be implied, even though they were not mentioned in the brief conversation v/hen Mr. Murray and the plaintiff agreed that the plaintiff should start work on the following Monday. This is so, whether the contract was a contract of service or for services. For example, what sort of work could the defendants require the plaintiff to do? Was he to work in his own time or during stated hours and, if so, what hours? Where could he be required to work? What notice, if any, was required by either side for the termination of the contract? What control could the defendants through Mr. Murray exercise over the order in which the plaintiff did such work as he might be required to do, or the manner of doing it? In my opinion, the law is not so divorced from reality as to assume that the same considerations as to the ascertainment of the relevant contractual terms, if a legal analysis of the terms has to be made for any purpose, applies to a contract of the nature with which we are here concerned, the taking on of a labourer on casual application to a site agent on a building site, as applies to commercial contracts between business men, whether made orally after discussion of terms or made in writing with elaborate provisions. The terms - even the essential terms of a contract of the present nature would often not be spoken or written at the time when the workman is taken on. They would be understood by reference to the known circumstances and the existing practices and conventions of a particular trade or a particular contractor or a particular site. Moreover, if and in so far as they were not implied, by common knowledge of what the practice was, at the time when the labourer was first taken on - the date when the legal analysis would regard the contract as being made - terms could well be added thereafter, as particular questions of the rights and obligations of the parties arose during the progress of the work. Again, to apply legal analysis, such terms would be treated as having been added, or the contract as being varied. In this context of the implication of terms, I would refer to what was so helpfully said by Lord Wilberforce in the recent House of Lords case,
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Liverpool City Council v. Irwin (1976) 2 Weekly Law Reports 562, at pages 566 to 567/D. In the last paragraph of that passage, Lord Wilberforce said: "The present case, in my opinion, represents a fourth category, or I would rather say a fourth shade on a continuous spectrum. The court here is simply concerned to establish what the contract is, the parties not having themselves fully stated the terms. In this sense the court is searching for what must be implied". So also in this case with which we are concerned. Accordingly I reject the defendants' contention that on legal analysis there were no contractual terms governing the relationship between the plaintiff and the defendants other than a term "self-employed labouronly sub-contractor". There were such other contractual terms. For this purpose it does not matter whether they were originally incorporated by implication when the plaintiff was taken on by Mr. Murray in January, 1972, or were added thereafter by the acceptance of the parties by conduct. What the relevant terms were was sufficiently proved by the evidence of Mr. Murray himself, the defendants' site agent, in crossexamination. His evidence, except in minor respects, is not, as the defendants suggest, merely evidence of what was done in performance of the contract. It is evidence of what the contractual rights and obligations were throughout the plaintiff's work for the defendants. True, it is not expressed in the questions and answers as being agreed terms of a contract. But I have no doubt that Mr. Murray understood, and everyone understood, that what he was being asked about was the relationship between the parties - the rights and obligations of the defendants and the workmen, including the plaintiff, which were understood and accepted to exist: that is, on legal analysis, the contractual terms. Miller v. Whitworth (1970) Appeal Cases 583 and Schuler v. Wickham (1974) Appeal Cases 235, House of Lords authorities relied on by the defendants, are not relevant. They hold that, subject to certain exceptions, you may not look at what has been done in pursuance of a contract in order to construe that contract. There are a number of other
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reasons, also, why I think those decisions are not relevant here. But the main reason is that we are not here concerned with construing a contract, but with evidence as to what the terms of a contract were - the implication of terms within Lord Wilberforce' s fourth category or fourth "shade of the spectrum". Mr. Murray accepted that he was responsible for "hiring and firing". In other words, as between the defendants and the workmen, including the plaintiff, he, Mr. Murray, could dismiss them. There is no question of his determining a contract between the defendants and a sub-contractor. He could move men from site to site, if he was so minded; and, in support of the existence of that contractual right on behalf of the defendants, he gave instances of having done so. If tools were required for the work, it was for the defendants to provide them. Again, as confirmation of that contractual obligation, Mr. Murray gave evidence of instances where the plaintiff had required tools for the work which he had been required to do, and the defendants had provided them. It was for Mr. Murray to tell the workmen, including the plaintiff, what particular work they were to do: "I tell him what to take and what to do". The centurion in St, Matthew's Gospel says to the man under him "Do this, and he doeth it". The man under him is a servant, not an independent contractor. All these things are in relation to the contractual relationships existing. "I tell him what to do" and he does it on Mr. Murray's instructions "because, when legal analysis has to be applied, it is a term of the contract that the plaintiff shall carry out the defendants' instructions what to do when they tell him to do it. The men, including the plaintiff, were employed on an hourly basis. The money paid to them would be correctly described as "a wage". In my judgment, on the tests laid down in the authorities, all of this indicates beyond doubt that the reality of the relationship was employer and employee - a contract of service. I do not propose to lengthen this judgment by examining afresh the criteria, so fully discussed in so many cases. The judge, as I have already said, based himself on the judgment of Mr. Justice MacKenna in Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance (1968) 2 Queen's Bench 497. Another judgment which I have found very helpful is that of Mr. Justice
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Cooke in Market Investigations Ltd. v. Minister of Social Security (1969) 2 Queen's Bench 173. My own view would have been that a declaration by the parties, even if it be incorporated in the contract, that the workman is to be, or is to be deemed to be, self-employed, an independent contractor, ought to be wholly disregarded - not merely treated as not being conclusive - if the remainder of the contractual terms, governing the realities of the relationship, show the relationship of employer and employee. The Roman soldier would not have been a self-employed labour-only subcontractor because of any verbal exchange between him and the centurion when he enlisted. I find difficulty in accepting that the parties, by a mere expression of intention as to what the legal relationship should be, can in any way influence the conclusion of law as to what the relationship is. I think that it would be contrary to the public interest if that were so: for it would mean that the parties, by their own whim, by the use of a verbal formula, unrelated to the reality of the relationship, could influence the decision on whom the responsibility for the safety of workmen, as imposed by statutory regulations, should rest. But, as I shall indicate later, I am prepared for the purposes of this appeal to accept a less stringent view of the law on this point, and my decision is therefore not based on that view. I would apply the principle laid down by Lord Justice Jenkins in Addiscombe Garden Estates Ltd. v. Crabbe (1958) 1 Queen's Bench 513. That was a case where the issue was whether the legal relationship between the parties was that of landlord and tenant or licensor and licensee. The relevant contractual document was clearly and deliberately directed towards emphasising that the relationship was that of licensor and licensee. Yet the court held that it was not. Lord Justice Jenkins, at page 527, quotes from the judgment of Lord Justice Denning in Facchini v. Bryson (1952) 1 Times Law Reports 1386, at page 1389, as follows: "The occupation has all the features of a service tenancy, and the parties cannot by the mere words of their contract turn it into something else. Their relationship is determined by the law and not by the label which they choose to put upon it".

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(Then Lord Justice Denning cited another authority and went on): "It is not necessary to go so far as to find the document a sham. It is simply a matter of finding the true relationship of the parties. It is most important that we should adhere to this principle, or else we might find all landlords granting licences and not tenancies, and we should make a hole in the Rent Acts through which could be driven - I will not in these days say a coach and four, but an articulated vehicle". That is the end of Lord Justice Jenkins' quotation from Lord Justice Denning. Lord Justice Jenkins himself goes on, at page 528 of the report, "The present case, of course, has nothing to do with the Rent Acts, but the important statement of principle is that the relationship is determined by the law, and not by the label which parties choose to put on it, and that it is not necessary to go so far as to find the document a sham. It is simply a matter of ascertaining the true relationship of the parties". So here. Counsel for the plaintiff does not assert that the reference to "the lump", whatever the words meant, was, or involved, "a sham". But, as the judgment of Lord Justice Jenkins shows, at least in certain types of case where the law has to decide whether the nature of a contract is A or B, even though the parties' expression of intention is not "a sham", it may still be properly ignored or overridden. If that is the correct approach in a case such as Addiscombe, surely the present type of case is an even stronger one for the acceptance of that approach. The parties cannot transfer a statute-imposed duty of care for safety of workmen from an employer to the workman himself merely because the parties agree, in effect, that the workman shall be deemed to be self-employed, where the true essence of the contract is, otherwise, a contract of service. However, as I have previously indicated, I am content for the purposes of this appeal to accept, in favour of the defendants, the less stringent view which appears hitherto to have found favour in a number of cases: that is, that the expression of the parties' intention may be a relevant factor,
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though certainly not a conclusive factor, in deciding what is the true nature of the contract. Thus, Mr. Justice MacKenna, in the Ready Mixed Concrete case (1968) 2 Queen's Bench 497 at page 312/H, expressed it, with deliberate circumspection, in these words: "It may be stated here that whether the relationship between the parties to the contract is that of master and servant or otherwise is a conclusion of law dependent upon the rights conferred and the duties imposed by the contract. If these are such that the relation is that of master and servant, it is irrelevant that the parties have declared it to be something else. I do not say that a declaration of this kind is always necessarily ineffective. If it were doubtful what rights and duties the parties wished to provide for, a declaration of this kind might help in resolving the doubt and fixing them in the sense required to give effect to that intention". Lord Widgery, Chief Justice, in Global Plant Ltd. v. Secretary of State for Social Services (1972) 1 Queen's Bench 139 at page 152/D, put it more confidently, in these words: "One must not overlook that the intention of the parties was that the relationship should be that of an independent contractor, and although the parties cannot by intention make a transaction into something which it is not, yet it is recognised that such intention is a factor for consideration in these cases". Incidentally, although in that case the court was considering whether or not a decision of the Minister should be quashed, the decision of the court shows that the mere fact that under the contract the workman receives his remuneration without deductions of P.A.Y.E. income tax and without having his insurance card stamped by the other party does not in itself necessarily, at least, involve the conclusion in law that it is not a contract of service. For, despite these factors being present in that case, and despite the fact that the parties clearly intended that the contract should not have the legal effect of a contract of service, the Minister's decision that it did have that legal effect was upheld.

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So on this basis, which for the purposes of this appeal I am prepared to assume in favour of the defendants to be correct, the parties' own expressed wish or intention may be a factor in determining what is the nature of the contract and thus in determining on whom the statutory duty is to rest. On that basis, which the learned judge accepted, how did he deal with this issue? He said (I read from page 43/G of the transcript of judgment): "There remains the question: What matters are alleged to be inconsistent with the relationship of master and servant? First, there is the fact that the plaintiff and the defendants both regarded or labelled him as a 'self-employed labour-only contractor'. Secondly, there is the fact, and fact it is, that the plaintiff was supposed to pay his own insurance stamp as a selfemployed person; that his wages were free of tax and that the obligation was upon him as upon a self-employed person to account to the Inland Revenue properly for tax. But I ask this question: When all the other indicia point to the relationship being that of master and servant, are these inconsistencies which should compel me to a contrary conclusion? It could not, as a true matter of law, be that they should so compel me". Then the learned judge makes reference to a case in the Queen's Bench Divisional Court and goes on: "Nevertheless, should it lead me to that conclusion? I think not". Then there is a passage which I have already read but will read again: "I accept what the parties accept, namely, the label, as a guide and no more. I regard the concept of 'the lump' in the circumstances of the present case as no more than a device which each side regarded as being capable of being put to his own advantage in a manner that I have attempted to describe earlier in this judgment, but which in reality did not affect the relationship of the parties or the performance of the substance of the contract between them". "I therefore", says the judge, "arrive at the conclusion that this was in reality a contract of service and that the relationship of master and servant existed between the defendants and the plaintiff". I agree with all the judge says in that passage.

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I would dismiss the appeal. LORD JUSTICE LAWTON: For many years past the building trade, and many outside it, have been familiar with phrases such as "working on the lump" or "working as a lump labour force". The trade union movement has expressed grave concern about this method of working Parliament has had to protect the Revenue by legislation because of the difficulties which it creates in the collection of income tax: but no attempt has been made so far by statute to forbid it. Indeed the Finance Act, 1971, recognised it as a way of working (see section 29) but put obstacles in the way of getting any fiscal benefits from it. We were told by counsel for the defendants that this appeal was the first one, as far as he knew, which called for consideration of the legal consequences to anyone alleged to have been "working as a lump labour force" in relation to any injuries sustained whilst at work and as a result of the builder who had had the benefit of his work (I use a neutral phrase deliberately) failing to use the safeguards which he would have been obliged to use under statutory regulations for the safety of any workman employed by him. What "working on the lump" or "as a lump working force" means must, of course, depend upon the evidence in each case. The trial judge, however, held that both parties in this case regarded the plaintiff as a "self-employed labour-only sub-contractor". What was the legal effect of "working as a lump working force" when, as in this case, the plaintiff was taken on (again I use a neutral phrase) as a general labourer? As a matter of law I can see no reason why a general labourer should not offer his labour on some such terms as these: "I do not mind what you ask me to do or where and when you ask me to do it hut you must understand that I am not going to call you master and I will not be your servant". Many men offer their labour on some such terms as these: the jobbing gardener is familiar to us all, as are self-employed farm workers to East Anglian farmers. When working they allow themselves to be controlled by those with whom they have made a bargain. In most cases when the bargain is made nothing is said about control; but it is accepted by both parties as an implied term that the hirer will exercise control. This does
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not mean either in fact or, in my opinion, in law that the hired man becomes a servant. As I understood Mr. Beldam's argument on behalf of the plaintiff, he did not challenge the general proposition which I have set out above. His case was that on the evidence the plaintiff did agree to work as the defendants' servant. Mr, Popplewell's argument was that as the object of both parties to the hiring was to avoid the relationship of master and servant and the only express words of the bargain were to this effect, the implied understandings as to which party was to exercise control did not operate to destroy the object of the bargain and to override the only express term of it. Now one thing is clear about the plaintiff's object in offering his labour to the defendants: he did not like having income tax deducted from his earnings and wanted to avoid, maybe evade, paying any more tax than he had to do. He was no twentieth century John Philpott Curran maintaining eternal vigilance to safeguard the right of individuals to be self-employed. He must have known all about the deduction of income tax from earnings and the payment as an employed person of National Insurance contributions. For many years he had been employed as a general labourer by builders. The employer he had had for six years before he started work with the defendants had deducted tax from his earnings and had stamped his National Insurance card. After leaving this employer and returning from a short visit to Ireland the plaintiff was unemployed for about a fortnight. Pour of his friends were then working "on the lump" for the defendants. They asked their foreman, a Mr. Murray, if he would take on the plaintiff. He said he would. Soon afterwards the plaintiff came along to the defendants to start work. He spoke to Mr. Murray. Prom the trial judge's findings I infer that he told Mr. Murray that his name was G-off. There can only have been one reason for doing this, namely, to make the task of the Inland Revenue in tracing him more difficult. Had I been sitting in another jurisdiction and the plaintiff had been charged before me with some offence concerned with the fraudulent evasion of tax, I should have had no hesitation in adjudging that his giving a false name was strong evidence of intending to evade fraudulently the payment of tax. But, as Mr. Beldam pointed out, the plaintiff has not been charged with the fraudulent evasion of
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tax, and although the trial judge found that by giving a false name he was "a willing and dishonest party to a device to evade his tax liabilities", this had never been put to him in the witness-box so that he had never had an opportunity of meeting this allegation. With some reluctance I felt bound to accept this submission, with the result that I have had to approach the problem presented by this appeal on the basis that the plaintiff intended to order his working relations with those who accepted his offer of work so that the tax attaching to his earnings under the appropriate Acts was less than it otherwise would have been. There can be no doubt what the defendants' intention was. Mr. Murray, whose evidence seems to have been accepted on this point, and generally, said: "But I did inform him that there were no cards; we were purely working as a lump labour force". The defendants could properly use independent sub-contractors. This is common in the building trade, and when skilled craftsmen are used, in most cases, if not all, there can be no doubt that such men are working as independent contractors. The taking on of genuine independent sub-contractors provides builders with a number of administrative and fiscal advantages. They are spared the task of accounting to the Inland Revenue for tax deducted from earnings and do not have to pay out money for the employer's contribution to National Insurance, In addition, when in 1972 the plaintiff was working for them they did not have to pay Selective Employment Tax. Clearly Mr. Murray wanted to get these benefits for the defendants. It follows that both parties to the labour bargain which was made in this case wanted to order their affairs so as. to avoid the incidence of taxation. They could only succeed in doing so, however, if they avoided bringing into existence the relationship of master and servant. This comes about because of the provisions of section 181 of the Income and Corporation Taxes Act, 1970. As is common knowledge, assessment for tax under Schedule D, which applies to the self-employed, gives small tax advantages which those assessed under Schedule E do not enjoy. It is unnecessary to state what they are; but as every judge who has had experience of the criminal courts knows, and probably most of the public nowadays, it is not these advantages which attract many men who work "on the lump" but the opportunities for the evasion of tax which Schedule D provides. Section 181 (1) of the 1970 Act is in these terms:
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"Schedule E. 1. Tax under this Schedule shall be charged in respect of any office or employment on emoluments therefrom...." Section 204 (1) imposes upon any person who makes a payment of income assessable to tax under Schedule E the duty to deduct income tax. Neither the plaintiff nor the defendants wanted these provisions to apply and they could only legally and effectively bring this about by agreeing that the defendants would not employ the plaintiff. Assuming, as I must for the purposes of this appeal, that the parties were not conspiring with each other to evade tax fraudulently, this is what they thought they had done. The defendants acted as if they had attained their objective. They did not deduct tax until they were obliged to do so under the Finance Act, 1972, section 28. If the avoidance of the relationship of master and servant was the prime object of the bargain, as I find it was from the circumstances in which it was made and the few words used, then I can see nothing in the implied terms which is inconsistent with this object. As I said at the beginning of this judgment, I can see no reason why in law a man cannot sell his labour without becoming another man's servant even though he is willing to accept control as to how, when and where he shall work. If he makes his intention not to be a servant sufficiently clear, the implications which would normally arise from implied terms do not override the prime object of the bargain. In my judgment this is just such a case. I appreciate that there are powerful arguments for thinking that "working on the lump" is socially undesirable and that many men who do so work do not appreciate that they may be depriving themselves of safeguards which statutory regulations enact must be provided for employed men; but these considerations are not sufficiently strong to make labour bargains of this kind void as being against public policy. If in a particular case the evidence leaves the court in doubt as to what the parties had agreed, there would, no doubt, be a finding which was more in accordance with public policy than against it. That is not this case. In my judgment there is no doubt what the parties intended and it was that the plaintiff should not be a servant of the defendants. Anyway public policy is an awkward horse for a judge to ride, particularly when it wants to go in more than one direction. Maybe the law should try to save workmen from their folly; but it should not encourage them to change a
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status which they have freely chosen when it suits them to do so. In my judgment it would be contrary to public policy to allow a man to say he was self-employed for the purpose of avoiding the incidence of taxation but a servant for the purpose of claiming compensation. For these reasons I would allow the appeal. In coming to this conclusion I have not overlooked the decisions in Global Plant Ltd, v. Secretary of State for Social Services (1972) 1 Queen's Bench 139, Market Investigations v. Minister of Social Security (1969) 2 Queen's Bench 173 and Construction Industry Training Board v. Labour Force ltd. (1970) 3 All England Reports 220. The first two were appeals by way of Case Stated, the last from a decision of the Industrial Tribunal. In all three cases the appellate courts were concerned with deciding whether there had been errors in law. This Court has a wider jurisdiction and is entitled to consider all the evidence given in the trial court. That I have done and to that evidence I have sought to apply the principles which were discussed in these three cases. In the enunciation of principle I found them helpful; but in the application of principle in the special jurisdiction with which these cases were concerned I got no help from them. As I understand the law there is no single test for deciding whether a man is a servant of another. Various factors have to be considered and weighed. Control of working is one; intention is another; carrying on business on one's own account is a third. The label which the parties attach to a bargain is not to be disregarded but it is far from being conclusive. It was after considering and weighing these factors that I adjudged that the parties' intention to avoid the relationship of master and servant was the predominating and all-important factor. I was helped in this decision by Mr. Beldam's acceptance that the bargain which the parties made was not a sham. I should add that I agree with the judgment of Lord Justice Megaw on all the remaining points in this appeal. LORD JUSTICE BROWNE: I agree with Lord Justice Megaw that this appeal should "be dismissed. As to the "working place" point, I have nothing to add. If Lord Justice Lawton did not think differently on the "employment" point, I should be content to say that I agree with Lord
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Justice Megaw for the reasons he has given and for the reasons given "by Mr. Justice Boreham in the passage at pages 43-44 of the transcript of his judgment which Lord Justice Megaw has read, hut as it is I think I should state my own reasons, even though they are really the same as those already given by Lord Justice Megaw. As I understand it, Lord Justice Lawton's reasons for holding that the relationship of master and servant did not exist between the plaintiff and the defendants are: (a) Both parties wanted to order their affairs so as to avoid the incidence of taxation. (b) They could only succeed in doing this if they avoided bringing into existence the relationship of master and servant between them (see Income and Corporation Taxes Act, 1970, sections 181 (1) and 204 (1). (c) The avoidance of the relationship of master and servant was "the prime object of the bargain". (d) If the intention not to create the relationship of master and servant is sufficiently clear from the circumstances and the express words used, implications which would normally arise from implied terms do not override the prime object of the bargain. If Lord Justice Lawton's view is right, I think it must follow that Global Plant Ltd. v. Secretary of State for Social Services (1972) 1 Queen's Bench 139 was wrongly decided. In that case it had been expressly agreed between Global Plant and the man in question (supported by a written document) that he should be a self-employed sub-contractor, that tax should not be deducted by Global Plant, and that he should stamp his own insurance card (see pages 142/C-H and 148/E-149/D). In spite of this, Lord Widgery, Chief Justice, held that the Secretary of State was not wrong in law in holding that, having regard to the other factors in that case, the relationship was that of master and servant (see page 152/D-E, which Lord Justice Megaw has already quoted, and pages 152-155). I think it would probably also follow that the decision of the Divisional Court in Maurice Graham Ltd. v. Brunswick (1974) 16 Knight's Industrial Reports 153 was wrong, as Mr. Popplewell submitted. These two cases are not
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binding on this Court, but in my view they were rightly decided, supported as I think they are by earlier authorities, including Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance (1968) 2 Queen's Bench 497 and Market Investigations Ltd. v. Minister of Social Security (1969) 2 Queen's Bench 173. Even if the "prime object of the bargain" between the plaintiff and the defendants in the present case was the avoidance of the relationship of master and servant, the question is whether they succeeded in that object. The parties cannot by a label decide the true nature of their relationship (see especially the passage from Addiscombe Garden Estates v. Crabbe (1958) 1 Queen's Bench 513 which Lord Justice Megaw has quoted). But I am afraid that I cannot agree with Lord Justice Lawton that this was the prime object of the bargain. The prime object, I think, was that the plaintiff should work as a general labourer on sites where the defendants were carrying on their business as building contractors. It is true that both parties intended that it was to be a term of the bargain that the defendants should not deduct tax and should not pay for the plaintiff's National Insurance stamps, but this was only one term. I agree with Lord Justice Megaw that there must have been - and were - other terms, and that the court must look at the arrangements as a whole to decide what the real relationship was. On the "basis of the single sentence in Mr. Murray's evidence which Lord Justice Megaw has quoted, Mr. Justice Boreham found that "the plaintiff and the defendants regarded the plaintiff as 'self-employed labour-only sub-contractor'" (transcript of judgment page 36). I am not sure that I should have given that sentence such a wide and important effect. The only evidence about what is meant by "being on the lump" was four questions and answers in the cross-examination of the plaintiff (page 7/A-B) and three in the re-examination of Mr. Murray (page 28/E-E). The plaintiff said that it means that the employer does not deduct tax and the man stamps his own card, and Mr, Murray went no further; I doubt if either of them intended or understood what Mr. Murray said to mean more than that. But, like Lord Justice Megaw, I am prepared to assume that the judge's interpretation is right. Even making this assumption, I agree with Lord Justice Megaw that this appeal fails, for the following reasons:
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(1) The term as to tax and stamps cannot have been the only term of the contract: as Lord Justice Megaw has pointed out, there would have been no contract at all unless there were other terms, tacitly understood, or "implied" in the sense explained by Lord Justice Megaw, and by Lord Wilberforce in the speech he has quoted, (2) Miller v, Whitworth Street Estates (1970) Appeal Cases 583 and E.L. Schuler A.G. v. Wickman Machine Tool Sales Ltd. (1974) Appeal Cases 235 are irrelevant. Those cases were concerned with the construction of written contracts; the rule that "it is not legitimate to use as an aid in the construction of the contract anything which the parties said or did after it was made" (Lord Reid in Miller at page 603/E) is only a particular application of "the general rule....that extrinsic evidence is not admissible for the construction of a written contract; the parties' intentions must be ascertained, on legal principles of construction, from the words they have used" (Lord Wilberforce in Schuler at page 261/B; on this point he agreed with the other members of the House, though he dissented on another point). In the present case, the question is not one of the construction of the contract, but what were the terms of an oral and only partially expressed contract. In my opinion, the court can in such a ease take into account what was done later as a basis for inferring what was agreed when the contract was made, or as establishing later additions or variations. But I do not think this point arises in the present case, because I agree with Lord Justice Megaw that Mr. Murray's evidence related to what was understood by both parties at the time when the contract was made. I need not set out that evidence or analyse it again, because I entirely agree with Lord Justice Megaw's statement of its effect. (3) I agree with Lord Justice Megaw and Mr. Justice Boreham that on the tests laid down by the authorities the evidence establishes beyond doubt that in reality the contract between the plaintiff and the defendants was a contract of service and their relationship was that of master and servant. The Market Investigations case (1969) 2 Queen's Bench 173 does not seem to have been cited to Mr. Justice Boreham, but I think that the application of the test suggested by Mr. Justice Cooke in that case at page 184/G-H (which I find very helpful) strongly supports his conclusion. After quoting Lord Wright, Lord Denning and the Supreme Court of the
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United States, Mr. Justice Cooke said that these observations "suggest that the fundamental test to be applied is this: 'Is the person who has engaged himself to perform these services performing them as a person in business on his own account?'. If the answer is 'Yes', then the contract is a contract for services. If the answer is 'No', then the contract is a contract of service". On this test, the distinction between the plaintiff in the present case and the jobbing gardener is plain, (4) I agree with Lord Justice Megaw that a declaration by the parties ought to be disregarded if the remainder of the contractual terms show that the reality of the relationship is one of master and servant, but, like him, I am prepared to assume that the less stringent view adopted by the authorities is right - namely, that it is a relevant, but certainly not a conclusive, factor. (5) In my judgment, Mr. Justice Boreham directed himself rightly in law, subject to the additional test suggested by Mr. Justice Cooke to which I have referred and to (4) above; the omission of these factors makes the tests he applied more and not less favourable to the defendants. When the right tests have been applied, the conclusion to be drawn is in my view a question of fact - see Global Plant (1972) 1 Queen's Bench at pages 152-155. The appellants have entirely failed to satisfy me that Mr, Justice Boreham's conclusion, stated at pages 43-44 of his judgment, was wrong; in my judgment it was right. As I have said, I would dismiss this appeal. Mr. Beldam: (Appeal dismissed with costs. Leave to appeal to House of Lords. Stay of execution to continue, the defendants undertaking, through counsel, to prosecute appeal, if taken, with due diligence)

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Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance
Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 is a UK labour law case concerning the definition of a contract of service, rather than a contract for services. The distinction is important because many employment law rights under the Employment Rights Act 1996 require that a claimant has "employee" status under s 230. An employee is defined as someone with a contract of employment, and that is defined to be a contract of service (or apprenticeship). The definition of a contract of service is left to the courts, and this is a leading case. Contents Facts Judgment Facts Mr Thomas Latimer had worked for Ready Mixed Concrete Ltd as a yard batcher from 1959 to 1963. The company delivered concrete, but had a policy of hiring independent contractor businesses to do the haulage because according to their policy documents, this allows "speedy and efficient cartage, the maintenance of trucks in good condition, and the careful driving thereof, and would benefit the owner-driver by giving him an incentive to work for a higher return without abusing the vehicle in the way which often happens if an employee is given a bonus scheme related to the use of his employer's vehicle." However they had become dissatisfied with their contractors and had started offering the jobs to current staff, with a set-up for hire-purchase for people to buy their own Leyland lorries (through a related company called "Ready Mixed Finance Ltd"). Mr Latimer took up this chance. He went into the hire-purchase to buy his own lorry, and was under a contract to haul concrete for the company. Mr Latimer's contract described him as an "independent contractor" and he paid all the lorry running costs. But he had to put the company colours on his truck. He also had to wear a company uniform while he was working. He
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could only use the lorry for Ready Mixed purposes. His remuneration was calculated on mileage and load. The question about whether he was an "employee" or an independent contractor arose because the company was not paying national insurance contributions on his behalf under the National Insurance Act 1965. If he was self employed they did not need to, but if he was an employee they did. The Minister had found that Mr Latimer was employed under a contract of service. The case went to the Court of Appeal and MacKenna J disagreed, saying that Mr Latimer was a 'small business man'. Judgment MacKenna J held that on the facts, Mr Latimer was not an employee, but rather 'a small business man'. He considered case law from around the world on the matter, including Queensland Stations Pty v. Federal Commissioners of Taxation 70 C.L.R. 539, Montreal Locomotive Works Ltd v. Montreal and Attorney General of Canada [1947] 1 D.L.R. 161 and United States v. Silk 331 U.S. 704 US Ct. The most important part of the judgment is as follows. "I must now consider what is meant by a contract of service. A contract of service exists if these three conditions are fulfilled. (i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service. I need say little about (i) and (ii). As to (i). There must be a wage or other remuneration. Otherwise there will be no consideration, and without consideration no contract of any kind. The servant must be obliged to provide his own work and skill. Freedom to do a job either by one's own hands or by another's is inconsistent with a contract of service, though a limited or occasional power of delegation may not be: see Atiyah's Vicarious Liability in the Law of Torts (1967) pp. 59 to 61
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and the cases cited by him. As to (ii). Control includes the power of deciding the thing to be done, the way in which it shall be done, the means to be employed in doing it, the time when and the place where it shall be done. All these aspects of control must be considered in deciding whether the right exists in a sufficient degree to make one party the master and the other his servant. The right need not be unrestricted. "What matters is lawful authority to command so far as there is scope for it. and there must always be some room for it, if only in incidental or collateral matters." - Zuijs v. Wirth Brothers Proprietary, Ltd. (1955) 93 C.L.R. 561, 571 To find where the right resides one must look first to the express terms of the contract, and if they deal fully with the matter one may look no further. If the contract does not expressly provide which party shall have the right, the question must be answered in the ordinary way by implication. The third and negative condition is for my purpose the important one, and I shall try with the help of five examples to explain what I mean by provisions inconsistent with the nature of a contract of service. (i) A contract obliges one party to build for the other, providing at his own expense the necessary plant and materials. This is not a contract of service, even though the builder may be obliged to use his own labour only and to accept a high degree of control: it is a building contract. It is not a contract to serve another for a wage, but a contract to produce a thing (or a result) for a price. (ii) A contract obliges one party to carry another's goods, providing at his own expense everything needed for performance. This is not a contract of service, even though the carrier may be obliged to drive the vehicle himself and to accept the other's control over his performance: it is a contract of carriage. (iii) A contract obliges a labourer to work for a builder, providing some simple tools, and to accept the builder's control. Notwithstanding the
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obligation to provide the tools, the contract is one of service. That obligation is not inconsistent with the nature of a contract of service. It is not a sufficiently important matter to affect the substance of the contract. (iv) A contract obliges one party to work for the other, accepting his control, and to provide his own transport. This is still a contract of service. The obligation to provide his own transport does not affect the substance. Transport in this example is incidental to the main purpose of the contract. Transport in the second example was the essential part of the performance. (v) The same instrument provides that one party shall work for the other subject to the other's control, and also that he shall sell him his land. The first part of the instrument is no less a contract of service because the second part imposes obligations of a different kind: Amalgamated Engineering Union v. Minister of Pensions and National Insurance [1963] 1 W.L.R. 441, 451, 452; [1963] 1 All E.R. 864. I can put the point which I am making in other words. An obligation to do work subject to the other party's control is a necessary, though not always a sufficient, condition of a contract of service. If the provisions of the contract as a whole are inconsistent with its being a contract of service, it will be some other kind of contract, and the person doing the work will not be a servant. The judge's task is to classify the contract (a task like that of distinguishing a contract of sale from one of work and labour). He may, in performing it, take into account other matters besides control."

Nethermere (St Neots) Ltd v Gardiner

Nethermere (St Neots) Ltd v Gardiner And Another [1984] ICR 612 is a British labour law case in the Court of Appeal in the field of home work and vulnerable workers. Many labour and employment rights, such as unfair dismissal[1], in Britain depend on one's status as an "employee" rather than being "self employed", or some other "worker". This case stands for the proposition that
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where "mutuality of obligation" between employers and casual or temporary workers exists to offer work and accept it, the court will find that the applicant has a "contract of employment" and is therefore an employee. This case is also notable in that it was one of former UK Prime Minister Tony Blair's last cases as a young barrister. He acted for the employers. He appeared in the Employment Appeal Tribunal on behalf of the employer but his arguments to deny the ladies unfair dismissal rights were emphatically rejected in the judgment. The employers also lost in the Court of Appeal. Contents

1 Facts 2 Judgment 3 Employment Appeals Tribunal 4 See also 5 Notes 6 External links

Facts The applicants (Mrs Taverna and Mrs Gardiner) sewed trouser flaps part time in the factory of Nethermere Ltd. At different times they became pregnant and had an arrangement to work from home. Each worked 5 to 7 hours a day, and for all but 8 or 12 weeks a year. They still used sewing machines provided by Nethermere Ltd. Their hours varied according to the employer's needs, they were paid according to the quantity of trouser flaps they made and they were not formally obliged to accept work. There was a dispute about an entitlement to holiday pay, and when the employer refused to give them the entitlement, they claimed they had been unfairly and constructively dismissed. So the preliminary question on appeal was whether the ladies were "employees" under a "contract of employment" and therefore entitled to unfair dismissal rights under s 153 of the Employment Protection (Consolidation) Act 1978 (now s 94 Employment Rights Act 1996). The Industrial tribunal held that there was a contract of employment, applying the test of whether the ladies could be said to be in business "on their own
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account". The Employment Appeal Tribunal dismissed the employer's appeal on this point, finding in favour of the ladies. The employer appealed again. Judgment In the Court of Appeal Stephenson LJ in the majority found, first, that whether a contract created a contract of service (and therefore a contract of employment) rather than a contract for services was one of fact, not of law. This has been followed in Carmichael in 1999 by the House of Lords. Stephenson LJ discussed what "mutuality of obligation" meant.[2] Does the law require any and what mutual obligations before there can be a contract of service? If the law as to contracts of service is that there must be mutual obligations which were not found by the industrial tribunal or cannot be inferred from the evidence, then the industrial tribunal misdirected itself in law and its determination can and should be set aside. That was Mr. Tabachnik's main contention for the company before this court. I at first thought that Mr. Tabachnik's task had been made easier by a concession, but that concession has been withdrawn, and I have come to the conclusion that his interesting and forceful argument must fail and that no misdirection on the point can fairly be attributed to the industrial tribunal. For the obligation required of an employer we were referred to old cases where the courts had held that justices had jurisdiction to convict and punish workmen for breaches of contracts to serve masters under the statute 4 Geo. 4, c. 34. For that purpose the court had to decide that there was mutuality of obligation, an obligation on the master to provide work as well as wages, complementing an obligation on the servant to perform the work: R v Welch (1853) 2 E&B 357; Bailey Case (1854) 3 E. & B. 607 and Whittle v Frankland (1862) 2 B&S 49. But later cases have shown that the normal rule is that a contract of employment does not oblige the master to provide the servant with work in addition to wages: Collier v Sunday Referee Publishing Co Ltd [1940] 2 KB 647, 650, per Asquith J. An obligation to provide work was not implied by this court in a salesman's contract: Turner v Sawdon & Co [1901] 2 KB 653; it was in a pieceworker's contract: Devonald v Rosser & Sons [1906]
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2 KB 728. The obligation required of an employee was concisely stated by Stable J. in a sentence in Chadwick v Pioneer Private Telephone Co Ltd [1941] 1 All ER 522, 523D: A contract of service implies an obligation to serve, and it comprises some degree of control by the master. That was expanded by Mackenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497, 515: A contract of service exists if these three conditions are fulfilled. (i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service. Of (iii) MacKenna J. proceeded to give some valuable examples, none on all fours with this case. I do not quote what he says of (i) and (ii) except as to mutual obligations: There must be a wage or other remuneration. Otherwise there will be no consideration, and without consideration no contract of any kind. The servant must be obliged to provide his own work and skill. There must, in my judgment, be an irreducible minimum of obligation on each side to create a contract of service. I doubt if it can be reduced any lower than in the sentences I have just quoted and I have doubted whether even that minimum can be discerned to be present in the facts as found by the industrial tribunal, particularly in paragraph 8 of its decision, and what the appeal tribunal said about it and counsel's interpretation of it. It followed that the ladies were under a contract of employment (however compare the definition of "mutuality" given in Carmichael v National Power plc, by Lord Irvine of Lairg).
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Employment Appeals Tribunal The case below in the Employment Appeals tribunal ([1983] ICR 319) before appeal to the Court of Appeal is of interest, because a future UK Prime Minister was representing the employer. A key plank of the New Labour election pledge in 1997 was to sustain labour market flexibility, which fits in with the approach of his submissions here. In essence, he was arguing that because the interpretation of a contract is one of law, and because it can only be a contract "of employment" if there is a continuing mutual obligation on each party to offer wages or work, the home workers were not employees and therefore were not under the protection of unfair dismissal rights. The judge, Tudor Evans J rejected this approach, and rejected "mutuality of obligation" as a criterion. However in the Court of Appeal, "mutuality of obligation" was accepted as a precondition to a contract, but interpreted in a different way. For the later history, Carmichael v National Power plc [1999] AC 1226, Tony Blair's old pupil master, now the Lord Chancellor Derry Irvine reconfigured "mutuality of obligation" to mean a expressed continuing duty to provide work. Mr Blair makes four submissions. First, that the question whether the applicants worked under a contract of service or for services is a question of law and not of fact. He relies upon the judgment of Stephenson LJ in Young & Woods Ltd v West [1980] IRLR 201. Secondly, Mr Blair submits that the industrial tribunal found as a fact that the employers were not obliged to supply the applicants with work and that the employees were not obliged to do it. Assuming that the tribunal have so found, Mr. Blair contends that where there is a lack of such mutual obligations, as a matter of law there cannot be a contract of service: mutual obligations are said to be a vital pre-requisite of such a contract. Thirdly, Mr. Blair criticises the conclusion expressed in paragraph 11 of the decision, submitting that the industrial tribunal have failed to relate their conclusion that the employers were not in business on their own account, to the facts: the tribunal have simply stated the conclusion but have not indicated what aspects of the facts led them to the conclusion. Fourthly, Mr. Blair contends that the industrial tribunal misunderstood the ratio of the decision in Airfix Footwear Ltd v Cope [1978] ICR 1210. Analysis of the judgment shows that the case did not decide that work performed consistently over a long period of time with an absence of mutual obligations could constitute a
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contract of service: a true analysis of the case shows that where the same quantity of work is accepted and performed over a long period, the proper inference is that there may be a mutual obligation to provide and perform it. On behalf of the applicants, Mr. Jones accepts that the question whether there is a contract of service or a contract for services is a matter of law to be inferred from given facts. He submits that upon this approach, the true and only inference which can be drawn in the present case is that the applicants were employed under a contract of service. He contends that whilst a mutual obligation to provide and perform work is a factor by which to test whether there was a contract of service and that it is difficult to envisage such a contract without some such obligation, it would be wrong to take this as the decisive factor. He submits that the employers' contention that once it is found that there is no mutual obligation there cannot be a contract of service even though there may be factors pointing strongly to the opposite conclusion is contrary to authority and wrong. We shall first consider Mr. Blair's submission that the status of the contract is a matter of law and not of fact. If it be a question of fact our powers on appeal are restricted. The employers would only be able to succeed if it were shown either that there was no evidence to support the findings of fact or if the decision was perverse in that no reasonable tribunal, properly directing itself in law could have reached the decision. The question arose in Young & Woods Ltd v West [1980] IRLR 201. The facts in that case are not material. Stephenson LJ at p. 205, referred to the opinion of Megaw LJ in Ferguson v John Dawson & Partners (Contractors) Ltd [1976] 1 WLR 1213, that the conclusion was one of law and to the opinion of Browne LJ in the same case that it was not. He continued, at p. 205: "but I must respectfully express my dissent from what Browne LJ said at the very conclusion of his judgment that the conclusion to be drawn from the facts as to the true legal relationship between the parties after the right tests have been applied is a question of fact. If by that he meant that it was a question on which this court cannot interfere, I prefer the view of Megaw L.J. that it is a question of law, in these cases of service or services as in the case of lease or licence, whether the true inference from the facts, the true construction or interpretation of a written agreement or of an
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agreement partly oral or partly written or of a wholly oral agreement is a matter of law on which there is a right and a wrong view, and if an industrial tribunal comes to what in the view of this court is a wrong view of the true nature of the agreement, it can and should find an error in law on the part of the industrial tribunal and reverse its decision. It cannot say that two views are possible of the true construction of this particular agreement on the facts which the industrial tribunal has found, and we cannot say that no reasonable tribunal could have come to the interpretation which the industrial tribunal has put upon the facts. It must make up its mind what the true interpretation of the facts and the true legal relationship created between the parties is." Ackner LJ and Sir David Cairns did not express an opinion on the point. But a similar view to that of Stephenson LJ was stated by MacKenna J in Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497, 512, 513. The contrary conclusion appears to have been expressed in Airfix Footwear Ltd v Cope [1978] ICR 1210, but Ferguson's case and the Ready Mixed Concrete case were not cited to the court. Young & Woods Ltd v West was, of course, decided subsequently. It seems to us upon the authorities to which we have been referred and in the absence of an argument to the contrary that we should follow the opinion of Stephenson L.J. in West's case that the conclusion is one of law and not of fact. We have to determine what was the true nature of the arrangement between the parties and this seems to us to be a conclusion of law. It is now convenient to consider whether the industrial tribunal in fact found that the employers had no obligation to provide work or the applicants to perform it, which is the basis of Mr. Blair's second and main contention. Mr. Jones submitted that it is not wholly clear what the tribunal found. He referred to the last sentence in paragraph 8 of the decision: "they could take time off as they liked and we accept that evidence." It is said that, looking at the whole of paragraph 8, the tribunal was accepting only that the applicants could take time off as they liked. It is true that
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grammatically the finding appears to relate to the freedom to take time off but we think that the clear intention of the tribunal was to accept all the matters of evidence reviewed in paragraph 8. If we are wrong in that conclusion, the difficulty is resolved by the opening words of paragraph 11: "Those are the facts on which we have to determine whether or not these ladies are employees." In saying this the industrial tribunal were referring to all the preceding paragraphs in which they summarised the evidence: if there were a conflict of evidence in relation to the matters referred to in paragraph 8, the tribunal would not have resolved the conflict but as far as we can see the contents of paragraph 8 were not a matter of dispute and therefore, bearing in mind the opening words of paragraph 11, in our judgment the tribunal was accepting as fact the whole of paragraph 8. At the end of the argument, we asked counsel for further submission as to whether, in paragraph 8, the tribunal clearly refer to the lack of mutual obligation or whether the findings were that there was no obligation as to the number of hours the applicants should work or how many garments they should complete with the implication that the applicants were obliged to do some work. Both counsel agreed that there was a reference to a lack of mutual obligations in the sense for which Mr. Blair contends. The words in paragraph 8 are: "He [Mr. Weisfeld] did not consider that he was under any obligation to home workers or they to him." We conclude that there was evidence and a finding of lack of mutual obligation, although our task would have been easier had the tribunal, after reviewing the evidence, clearly set out the findings of fact which they were making. It is convenient also at this stage to consider Mr. Blair's submission that the tribunal failed, when deciding the question which they asked themselves (whether the applicants were in business on their own account), to state what factors led them to that conclusion. We entirely agree with Mr. Blair that it would have been much more helpful if this had been done but it is, we think, reasonably clear what facts were found. Since the conclusion is one of law upon which we have to exercise our own independent judgment on the given facts, we think that the failure of the tribunal to indicate what factors led them to their conclusion is irrelevant. Although we are taking the point somewhat out of order, we shall now consider the submission that the industrial tribunal misunderstood the ratio in Airfix Footwear Ltd v Cope [1978] ICR 1210. We should say at once that
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whether or not the tribunal misunderstood or misinterpreted the decision is of no effect in this case. It is clear to us that the decision of the tribunal was not based on the Airfix Footwear case. The decision was based on the answer to the question whether the applicants were in business on their own account. The industrial tribunal considered that there was a similarity of fact in the Airfix case and the present case in that in both cases the relationship had endured for a substantial time. It is true that the tribunal interpreted the decision in the Airfix case as justifying the conclusion that a contract of service may arise on such facts but, even if they were wrong in that view, we have to exercise our own judgment on the facts as found. It was argued for the employers in the Airfix case that they were not obliged to provide work for the applicant nor was she obliged to perform it and that, in such circumstances, no reasonable tribunal acting judicially could find that there was a contract of service. The appeal tribunal acknowledged that the absence of mutual obligations, where work is offered and performed sporadically, might lead to the conclusion that there was a series of contracts of service or a contract for services but that the answer would depend on the facts of each individual case. The court then reviewed the evidence as found by the tribunal, including the fact that the work had been done for seven years and for five days a week and concluded that, on the material before it, the tribunal was well entitled to come to the conclusion that there was, by reason of the duration of the relationship, a continuing contract of employment. We do not read the judgment as establishing the proposition that before a contract of service can exist there must be the mutual obligations for which Mr. Blair contends. This leads us to the central submission made on behalf of the employers. In submitting to us that mutual obligations are a crucial pre-requisite of a contract of service, Mr Blair contends that the reason for such a precondition is that a contract of service is a continuing relationship between employer and employee. If the performance of work only arises from time to time it is inconsistent with the continuing obligations which are implicit in the master and servant relationship. Mr. Blair accepted that there is some doubt as to the extent of an employer's obligation, whether it is to provide work or to pay wages, but he contends that the employer must do
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one or the other and his obligation is continuous. On the other hand, employees have the duty to be ready and willing to work and this duty is inimical to the finding in paragraph 8 of the industrial tribunal's reasons that the employers were not obliged to provide nor the applicants to perform work. Mr Blair lays considerable emphasis upon the observations of Kilner Brown J delivering the judgment in Mailway (Southern) Ltd v Willsher [1978] ICR 511, 513-514: "We have had occasion recently to examine the meaning of 'employment' as contemplated by the Employment Protection Act 1975 in Bullock v Merseyside County Council [1978] ICR 419. Our decision was that employment involved as one factor a necessity for direction and control to be exercised by the employer. As a general rule the employee has to be at the disposition of the employer. In ordinary layman's language the question is: who has the last word in determining whether and how the employee is required to work? Here the workers, in our judgment, were not required to work in accordance with a contract of employment on any particular day. They were invited to work. They were told that work was available if they presented themselves and the last word was with those offering their services. They did not have to come if they did not want to." We do not accept that the Mailway case is authority for the proposition as framed by Mr. Blair, that once it is found that there is no obligation on either side it is impossible to conclude that there was a contract of service. Young & Woods Ltd v West [1980] IRLR 201 shows to our satisfaction that all the indicia have to be considered, leaving perhaps as fundamental the test whether the applicant was in business on his or her own account. We say that this is perhaps the fundamental test because, although Megaw LJ adopted it in Ferguson's case, he described it as very helpful and Stephenson and Ackner LJJ in West's case found it of assistance. Apart from such a test, there are no conclusive indicia and certainly no preconditions. As we understand the position, at one time it was considered that the question of control (whether the employer could dictate where, when and how the work should be done) was thought to be conclusive but such a test is now considered to be only one among many factors. What then is the approach which we should adopt in this case when
40

deciding what inference should be drawn from the facts as found? We consider that we should adopt the test whether the applicants were in business on their own account and that, in doing so, we should consider what pointers there may be which indicate one direction rather than the other. That was the approach of Stephenson LJ in West's case [1980] IRLR 201, 208. It is at this stage that there is a divergence of view between the members of this appeal tribunal. The majority opinion (the lay members) is that this was a contract of service and that the appeal must be dismissed. They are impressed by these factors (not expressed in any descending order of importance) when asking themselves the question whether the applicants were in business on their own account: (i) that the employers provided the applicants with a machine with which to do the work. (ii) The method of payment. The applicants were paid at the same rate as those who worked in the factory. They kept time sheets sent by the employers and these determined their remuneration. One of the lay members considers that, although not specifically found as a fact, the evidence points to the factory employees being paid on piece work as were the applicants in this case. Both lay members would wish to emphasise that the applicants had no freedom to negotiate the rate of remuneration and there was evidence before the tribunal from Mrs. Taverna that a drop in rate was imposed unilaterally by Mr. Weisfeld. (iii) Although the applicants were free to choose their hours of work, once they had accepted the work from the van driver they had to perform it. If they had not done the work they would have been "sacked." (iv) The applicants were unable to change the nature of the work. Mr. Weisfeld decided what work they should do, whether putting on pockets or sewing on flaps. It is considered that if the applicants were selfemployed, the nature of the work would have been negotiable, as would also the price for it. (v) One applicant, Mrs. Gardiner, said in evidence that she was asked to go down to the factory to be shown what to do. She was told that if the machine went wrong to ring the factory and a mechanic would come out. (vi) Looking at the economic realities of the relationship the applicants
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were not free to refuse work. (vii) This was a settled relationship which lasted for a considerable time. The lay members wish to emphasise that the arrangement required that although the applicants could decide how much work to do, nevertheless it was agreed that they had to do sufficient to make it worthwhile for the van driver to call. (viii) That the work performed by the applicants was similar to that done in the factory. (ix) That the applicants were not running any economic risk, and that they had no opportunity to profit from sound management. (x) The economic reality of the applicants' situation was consistent with a contract of service. Thus, the lay members, having looked at all these facts and addressed their minds, as did the industrial tribunal, to the Court of Appeal judgment in Young & Woods Ltd v West have answered "No" to the question: "Were the applicants in business on their own account?" The lay members have also posed themselved the question which Bristow J. called the ultimate one in Withers v. Flackwell Heath Football Supporters Club [1981] IRLR 307, 308: "Is he on his own business rather than the business of the party for whom the work is being done?" To this the lay members reply: "The applicants were upon the business of the party for whom the work was being done." Therefore they find it impossible to reverse the industrial tribunal's decision and they reject the appeal. In the minority opinion this was not a contract of service. A prime fact is that neither the employers nor the applicants were respectively under and obligation to provide or to perform work. Each was free and in particular the applicants could at all times elect whether or not to work. Thus, Mrs. Taverna exercised her right by taking lengthy periods when she did no work at all as did Mrs. Gardiner to a lesser extent. This is a clear indication that the applicants were not bound to serve and equally that the employers were unable to order the applicants to do the work. The importance of this state of fact was recognised in Mailway (Southern) Ltd v Willsher [1978] ICR 511 and in Airfix Footwear Ltd v Cope [1978] ICR 1210. The applicants were not obliged to present themselves at fixed hours at the factory, ready to do such work as the employers might order them to do. There was no undertaking to do a specific number of hours' work. There was, briefly
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stated, no obligation upon the applicants to provide themselves to serve. They were free to do the work as and when they liked, they could take time off and they were not obliged to complete the work in any specified period. The industrial tribunal (see paragraphs 6 and 11 of the decision) found that if Mrs. Gardiner wanted less work she would say so. Moreover (see paragraphs 10 and 11 of the tribunal's findings) Mr. Weisfeld told the applicants that he was not deducting tax or national insurance. On the finding, this was a part of the arrangement. It is quite true that the applicants took no financial risk and that they had no responsibility for investment and management, but they were engaged in semi-skilled and simple work and such considerations seem to be inappropriate in the circumstances. The absence of such factors ought not to be decisive. A contrary view might lead to the conclusion that all semi-skilled workers working at home in their own time and when they chose are employed under a contract of service. The following comments are made concerning some of the factors which have influenced the majority opinion: (i) There is no finding (and no evidence) that the factory workers were employed on piece work. The evidence and finding was that Mrs. Taverna was paid according to the number of garments she completed, that she kept time sheets and was paid weekly at the same rate as in the factory. What precisely was the method of payment in the factory was not disclosed by the evidence. (ii) Although Mrs. Taverna said at one stage in her evidence that the rate was dropped when she was working on pockets, the tribunal made no finding on this part of the evidence. Mr. Weisfeld was not asked about it. Mrs. Taverna is not recorded as saying that it had been imposed upon her. Later she appears to contradict her earlier evidence: she is recorded as saying "rate always the same." (iii) The finding is not that once the applicants had accepted the work they had to perform it. The finding was that they were free to decide whether to work and, if they chose to do so, they were free to decide for how many hours they would work, provided that it was made worthwhile for the van driver to call. This is merely an agreement that the applicants would make it commercially worthwhile for the employers to send the van to their
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houses. It does not indicate that the applicants were bound to do the work. If it be the fact that once they had accepted the work, the applicants had to perform it, that is equally compatible with a contract for services in the sense that a failure to perform the work would constitute a breach of contract. To suggest that such a failure would cause the applicants to be "sacked" (that is to be dismissed from the employers' service) is to beg the question. It might equally be said that the arrangement would be terminated and that the employers would dispense with the applicants' services. In fact, the applicants did not work sometimes for lengthy periods but the relationship was not terminated. (iv) It is true that Mrs. Gardiner stated in evidence that she was asked to go down to the factory to be shown what to do and that if the machine which was provided for her went wrong, she should telephone the factory and the mechanic would come out. But Mr. Weisfeld was not asked about this evidence and there is no finding of fact in relation to it. (v) It is difficult to comment on Withers v Flackwell Heath Football Supporters Club [1981] IRLR 307, since it was not cited in argument and we have not had the advantage of submissions from either counsel with respect to it. (vi) There is no evidence that the applicants had to perform the work, although economic circumstances may have made it desirable for them to do it. In the result, although there are factors which can validly be taken into account (for example, the provision of equipment), the inference which should be drawn is that this was not a contract of service. The applicants were in business on their own account. However, for the reasons given this appeal must fail.

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IN THE SUPREME COURT OF JUDICATURE COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL Royal Courts of Justice Strand, London, WC2A 2LL 10th April 2003 Before: THE PRESIDENT LORD JUSTICE THORPE and LORD JUSTICE MUMMERY ____________________ Between: RAYMOND FRANKS - and (1) REUTERS LIMITED (2) FIRST RESORT EMPLOYMENT LIMITED ____________________ MR MICHAEL SUPPERSTONE QC & JAMES WARD (instructed by Sternberg Reed Taylor & Gill, Solicitors, 12/18 Station Parade, Barking,Essex, IG11 8DN ) for the Appellant MR PAUL ROSE QC (instructed by Latham & Co Solicitors, 15 High Street, Melton Mowbray, Leicestershire, LE 13 OTX ) for the Respondent Hearing dates : Tuesday 11th March 2003 ____________________ HTML VERSION OF JUDGMENT : APPROVED BY THE COURT FOR HANDING DOWN (SUBJECT TO EDITORIAL CORRECTIONS) ____________________
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Appellant

Respondent

Crown Copyright Lord Justice Mummery : Introduction 1. The issue on this appeal is whether the employment tribunal erred in law in holding that Mr Raymond Franks was not an employee of Reuters Limited (Reuters) within the meaning of the Employment Rights Act 1996. In section 230 an "employee" is defined as an individual, who has entered into or works under or worked under a contract of service. The contract may be expressed orally or in writing, or it may be implied. 2. Mr Franks went to work at Reuters on a temporary placement as a driver at the end of 1993. He found the work through an employment agency, First Resort Employment Limited (First Resort), which is now in liquidation. First Resort took no part in the appeal to the employment appeal tribunal or to this court. 3. After six months Mr Franks became a full time driver at Reuters. He remained so until November 1997. He was then selected to work as a back up at the Help Desk. In April 1998 he became permanent on the Help Desk. He also carried out new driving duties. His hourly rate of pay was increased. On 13 August 1999 he was told that his services were no longer required. He worked for another month and left on 10 September 1999. 4. The response of Reuters to the claims for unfair dismissal, redundancy pay and damages for breach of contract, which Mr Franks made in the belief that he was an employee, was that he was not employed by them, but by First Resort, who paid his wages, after deducting PAYE. First Resort denied that they employed him, but they were willing to continue to offer him available assignments. 5. On 12 May 2000 the employment tribunal held, after hearing evidence from Mr Franks , the Operations Manager of Reuters and a director of First Resort on a preliminary issue, that he was not an employee of either respondent. Mr Franks had no claim for anything against
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either of them. On 27 June 2002 the decision was upheld by the employment appeal tribunal. Decision in Carmichael v. National Power plc 6. The employment tribunal's reading of the decision of the House of Lords in Carmichael v. National Power plc [1999] 1 WLR 2042 on the importance of "mutuality of obligation" conditioned their characterisation of the relationship between Mr Franks and Reuters. The speeches of Lord Irvine LC and Lord Hoffmann also contain valuable guidance of the highest authority on the role of employment tribunals in finding facts relevant to the issue whether a tribunal applicant is, or is not, an employee. 7. In this case the tribunal cited Carmichael as authority for the proposition that mutuality of obligation is a necessary condition of an employment relationship. They applied that proposition to their findings of fact and concluded that they could not see, in the relationship between Mr Franks and Reuters, any mutuality of obligation which would override the other matters they had taken into consideration. In their view the point was that "he [Mr Franks ] could have said that he did not wish to work for [Reuters] any longer and similarly [Reuters] could have said that they no longer wished to have him working for them." (Paragraph 8 of the extended reasons.) 8. It will be necessary to examine the basis for the tribunal's decision on that point. Before that, however, more should be said about Carmichael and the context of the key ruling on the requirement of mutuality of obligation. 9. The question for the employment tribunal in Carmichael was whether guides taking parties on tours of power stations on "a casual as required basis" were entitled to require a statement of the terms of their employment in accordance with s 1 of the Employment Protection (Consolidation) Act 1978. The tribunal held that they were not employees of National Power and dismissed their applications.
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10. The employment tribunal found that the tour guides did not have contracts with National Power, "whether of service or otherwise": see p.2044H. In reaching that conclusion, the employment tribunal did not confine their consideration to the written correspondence passing between the guides and National Power, which was relied on by the guides as constituting a contract of employment. The tribunal also considered evidence of the surrounding circumstances, the way in which the tour guide system was operated by the parties, how the parties had conducted themselves subsequently and evidence of the parties as to how the engagement had been understood by them. The House of Lords held that to be the correct approach to the employee issue: see p. 2045FH. On the material before them the tribunal found that the guides were only paid for the hours they worked. When they were not working as guides they had no contractual relationship of any kind with National Power. There was an absence of mutuality. There was no obligation on the company to provide casual work. The company was merely intimating that work might be offered. There was no obligation on the applicants to undertake it. The applicants did no more than intimate that they were ready to be invited to attend for casual work as station guides, as and when National Power required their services. The correspondence was not intended by the parties to constitute an exclusive or complete record regulating their relationship. So, the employment tribunal were entitled to make inferences from evidence of the surrounding circumstances and the subsequent conduct of the parties. 11. The House of Lords held that, on the findings of fact by the tribunal, there was no error of law in their conclusion that the tour guides had no contracts, that their engagement gave rise to no legal obligations at all and that they could not therefore be employees of the company. There was absent from the relationship the irreducible minimum of mutual obligation necessary to create a contract of service. 12. The notable point is that the employment tribunal did not reach their decision simply on the basis of construing the correspondence between the company and the tour guides. The tribunal correctly looked beyond and beneath the documents. They made their finding of lack of mutuality of obligation only after considering evidence of what the parties said and did, both at the time when they were engaged and subsequently,
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including evidence as to how the relationship had been understood by them: see the speech of Lord Irvine LC at 2045F-H and of Lord Hoffmann at 2049C-D, 2050C- 2051C. Decision of employment tribunal 13. Mr Supperstone QC, who did not appear in the employment tribunal or in the appeal tribunal, submitted on behalf of Mr Franks that the tribunal had erred in their approach to the resolution of the preliminary issue of whether Mr Franks was an employee. They had failed to address the question whether there was an implied contract of service between him and Reuters. As a result they had failed to consider evidence, or to make the findings of fact, relevant to that issue. It would be necessary to remit the matter for re-hearing by a fresh tribunal. 14. His submissions centred on the tribunal's findings of fact set out in paragraph 5 of the extended reasons sent to the parties on 12 May 2002:"1. The Applicant had entered into an Agreement with [First Resort] whereby they agreed to try to find him (described in the Contract as the Temporary Worker) work, and agreed to pay to the Temporary Worker wages calculated at an hourly rate for each hour worked. We also find that under the provisions of that Contract and from what Mr Hayes [a director of First Resort] told us that the Temporary Worker was not under an obligation to accept an offer and there was no obligation on [First Resort] to provide any work to the Temporary Worker. 2. [Reuters] did not pay the Applicant. They paid to [First Resort] a fee for their services which included an agreed sum which [First Resort] paid to the Applicant in respect of the hours which he worked. 3. [Reuters], while requiring the Applicant so long as he worked for them, to comply with the hours which they set for him, were under no obligation to continue to accept his services. The Applicant was under no obligation to continue to work for them, but could have informed [First Resort] that he no longer wished to perform work
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for [Reuters] and to have asked [First Resort] to find him other work. 4. The Applicant was not paid sick pay, and was only paid holiday pay because [Reuters] paid to [First Resort] a sum which included money to be set aside for when the Applicant took holidays, and which [First Resort] paid to him. 5. The Applicant had to arrange his holidays with [Reuters]." 15. Having regard to those findings, the tribunal then asked themselves what was the position of Mr Franks vis-a-vis Reuters? They concluded that he was not an employee within s 230 of the 1996 Act. They expressly dealt with two submissions. First, they rejected the contention of Mr Hayes, a director of First Resort who represented them at the hearing, that the matter was concluded by the provision in paragraph 8 of the Terms and Conditions of Business in respect of Temporary Workers, which read: "Temporaries are supplied to the Client on the basis that each Temporary will be the Employee of the Client throughout the duration of the assignment." They pointed out that the nature of the relationship was determined by principles of law, not by what the parties chose to call it. 16. Secondly, the tribunal rejected the argument that the long service of Mr Franks with Reuters indicated that he was an employee of theirs. 17. After considering several authorities, from which they were unable to derive any assistance, the tribunal cited Carmichael for the emphasis placed on the importance of mutuality of obligation and concluded the preliminary issue in favour of Reuters and First Resort on that basis. They held (paragraph 8 of the extended reasons) that Mr Franks was "clearly able not to turn up for work if he so chose but to go back to [First Resort] and say that he required assignment to another post." They added that it was immaterial that he did not do so "because clearly he had security of work while continuing to work for [Reuters]." The appeal tribunal upheld this approach, saying that it did not involve any
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misdirection or error of law and that it was a complete answer to Mr Franks ' appeal and to his claims against Reuters. The Legal Position Discussed 18. Drawing a line between those who are employees (and so have statutory employment rights) and those who are not entitled to statutory employment protection has become more, rather than less, difficult as work relations in and away from the workplace have become more complex and diverse. This development makes it all the more important that the employment tribunal, as the tribunal of fact, should consider all the relevant evidence about the dynamics of the work relationship between the person claiming to be an employee and the putative employer. Before characterising the relationship, the tribunal must make clear and comprehensive findings of fact on the relevant evidence. 19. Even if the work relations are documented, the documents do not necessarily present the complete picture. That is why the tribunal in Carmichael were held by the House of Lords to have acted correctly in examining not only the correspondence, but also the circumstances surrounding it, the subsequent conduct of the parties, and the way in which the parties operated and understood the situation. Unless and until the tribunal have conducted this exercise and obtained an overall picture of the work relationships between the parties, it is impossible in many cases for them to reach an informed and sound conclusion on whether there is mutuality of obligation in the form of an express or implied contract of service. 20.In some cases it may be unnecessary to look beyond or beneath the documents, which the parties have agreed should embody the exclusive record regulating their relations. As Lord Irvine LC recognised in Carmichael at p.2047A, where the case turns exclusively on the true meaning and effect of the documentation, further inquiry about what the parties said and did may not be appropriate. 21. The instant case does not turn exclusively on the construction of documents. The available documentation relates almost entirely to the regulation of the relations between (a) Mr Franks and First Resort
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and (b) First Resort and Reuters. The crucial relationship is that between Mr Franks and Reuters. It is the third limb of the tripartite work arrangements. It is hardly documented at all. It must be considered against the background of the other relationships which are documented, but the very lack of documentation of the work relations between Mr Franks and Reuters highlights the importance of considering all the evidence relevant to the possible formation of an oral or implied contract of service. 22. I agree with Mr Supperstone that the tribunal's findings of fact do not appear to be based on a full and properly directed consideration of all the relevant evidence relating to the work relations between Mr Franks and Reuters between 1994 and 1999. As a result the findings are limited in extent and there are some uncertainties and omissions in the facts found in paragraph 5 of the extended reasons. In making such criticisms I am, of course, aware that the extended reasons must be read in a fair and reasonable way, without excessive concentration on the detail and not over-critically. I am also conscious that this court is indebted for the help from leading counsel on each side, which was not available to the tribunal. 23. In my judgment, a gap in the extended reasons is identified by Reuter's own respondent's notice, in which it is contended that the decisions of the employment tribunal and the appeal tribunal be upheld on the additional ground that " a. There was no contractual relationship of any kind between the Appellant Mr Franks and Reuters. The absence of any contract results in the Appellant failing in his claim." 24. Unlike the tribunal in Carmichael, this tribunal did not clearly address the issue of whether, on the evidence, there was a contractual basis (whether express or implied) for the work done by Mr Franks at Reuters, apparently full time " complying with the hours they set for him" for over five years; whether, in particular, a contract between Mr Franks and Reuters could be implied from the circumstances of his work for Reuters and from what was said and done by the parties at the time when he started work or subsequently; and, if so, what were the
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rights and obligations of the parties under it in relation, for example, to the nature of the work to be done, the regularity and number of hours worked, the fixing of rates of pay, arrangements for payment, disciplinary matters and so on. It was necessary for the tribunal to undertake the exercise of ascertaining the obligations (if any) of the parties in order to determine whether mutuality of obligation existed between Mr Franks and Reuters. 25. The evidence summarised in the extended reasons and the documents referred to demonstrates that there was certainly a contractual background to the work done by Mr Franks for Reuters. 26.First, there was a written Temporary Worker Agreement made in 1988 regulating the relations between Mr Franks and First Resort. It is marked "CONTRACT FOR SERVICES." It expressly provided that First Resort would try to find work for him, though Mr Franks was under no obligation to First Resort to accept the assignment offered. The only express obligation of First Resort was, if he accepted the assignment offered, to see that he was paid out of the money paid to them for the work that he did. First Resort issued another "Temporary Workers" Contract in respect of Mr Franks when he was selected to be a Help Desk Operator in 1999. The express provisions in those documents were the basis of First Resort's argument, which was accepted by the tribunal, that Mr Franks was not employed by them. That conclusion could not, of course, by itself be determinative of the issue of mutuality of obligation as between Mr Franks and Reuters. The First Resort documents do, however, form part of the factual matrix of the relations between Mr Franks and Reuters. 27. Secondly, there was a contract between First Resort and Reuters contained in a document called "Terms & Conditions of Business." This document appears to have been supplied by First Resort to Reuters when First Resort successfully tendered for the supply of contract personnel to Reuters under a "Vehicles Operations Contract." The "Conditions of Business-Temporary" set out the standard terms on which First Resort transacted business with a "Client", such as Reuters, by supplying "a Temporary" such as Mr Franks , "with a view to carrying out work for the Client." Those conditions regulated the relations as
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between First Resort and Reuters in respect of the work done by Mr Franks for Reuters. They provided for payment of "charges" to be made by the Client to First Resort based on hourly charges notified to the Client and for payments of NI contributions. Condition 8 was referred to in the extended reasons and has been quoted in paragraph 15 above. As in the case of the Temporary Worker Agreement, the Conditions of Business are not determinative of the question whether Mr Franks had an express or implied contract of service with Reuters, but it is part of the factual matrix of the relations between Mr Franks and Reuters. Although the tribunal were right in law to state that First Resort and Reuters could not determine by agreement in paragraph 8 of the Conditions that Mr Franks was an employee of Reuters, the tribunal should have considered the relevance of that paragraph and of the remaining conditions as some evidence of the understanding of First Resort and of Reuters on the work situation of Mr Franks . Having held that the Conditions of Business could not determine that question, the tribunal seem to have gone further and excluded it entirely from their consideration of the issue whether or not Mr Franks had been an employee of Reuters. 28.Thirdly, there is another document in the bundle, which does not feature in the extended reasons, but appears to have been associated with the tender documents. It set out various requirements concerning the drivers, such as Mr Franks : the holding of driving licences, the importance of punctuality and of starting work at 0700 every morning, standards of smart dress and good behaviour, the supply of vehicles for the drivers and provision for regular operational and price reviews of the arrangements. 29.The tribunal also excluded from their consideration evidence of the length of time for which Mr Franks worked at Reuters. The length of time in this case is unusual for a person, who is described in the documents as a "Temporary Worker." Most temporary workers are not entitled to the right not to be unfairly dismissed or to redundancy pay, because they have not served for the qualifying period of service. The question whether they are employees or not is usually irrelevant. Whilst I would agree that a person cannot become an employee simply by reason of the length of time for which he does work for the same person, the
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tribunal appear to have treated the evidence of length of service as irrelevant to the employment issue. In my judgment, it is not irrelevant evidence in the context of an individual who sought a temporary placement through an employment agency, but was then allowed to stay working in the same place for the same client for over five years, during which period he was re-deployed. Dealings between parties over a period of years, as distinct from the weeks or months typical of temporary or casual work, are capable of generating an implied contractual relationship. That possibility should have been addressed by the tribunal as part of its consideration of the overall situation in relation to his work, first, as a driver and then as Help Desk Operator. Reuters' Submissions 30. Mr Rose QC for Reuters rightly reminded the court that the decision of the employment tribunal can only be appealed on questions of law and not on the facts. The question whether an individual is an employee is, in a case such as this, one of mixed law and fact. He submitted that there was no error in the extended reasons as to the facts or the law relevant to the issue whether Mr Franks was an employee of Reuters. The self-direction of law on the requirement of mutuality of obligation was impeccable. It was in accordance with Carmichael. The tribunal had correctly applied it to the facts. The tribunal had taken into account the facts concerning his placement and its duration and the continuing part played by First Resort under their agreements with Mr Franks and Reuters, such as the payment of Mr Franks by First Resort for the work done by him. Although all parties had an economic interest in the relationship between Mr Franks and Reuters, it was not a contractual relationship. Mr Franks was at no time able to identify the existence of an agreement between him and Reuters, let alone one under which he was under an obligation to work for Reuters or under which Reuters were obliged to provide him with work. 31. As for the duration of Mr Franks ' placement with Reuters he cited Hewlett Packard v. O'Murphy [2002] IRLR 4 as a case in which an individual who had hired himself out through an agency to work for a company for six years or so was held not to be an employee, as there
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was no contract and no mutuality of obligation with the company. The company had been happy to have him working for them as long as he was not a permanent employee. Mr Rose also cited the observations of Buckley J sitting in this court in Montgomery v. Johnson Underwood Ltd [2001] IRLR 269 at paragraph 43 as a reminder that the confusion that may exist about the protection of those who work through an employment agency is a matter for the consideration of the legislature, the implication being that it is not a matter for the courts. 32. Mr Rose complained, with some justification in my view, that the appeal had been argued differently by Mr Supperstone than it had been argued below or in the skeleton argument submitted before Mr Supperstone was brought into the case at a very late stage. In particular, he pointed out that, even now, it was not argued on behalf of Mr Franks that there was no evidence to support the finding of lack of mutuality. That finding alone was sufficient to dispose of the contention that Mr Franks was not an employee of Reuters. The other findings of fact, which Mr Supperstone submitted the tribunal should have made, would not have altered the position in the absence of mutuality. If Mr Franks claimed to be an employee, the burden was on him to establish that there was a contract. He had failed to prove that he had a contract of any kind with Reuters. Conclusion 33. In my judgment, it is right to allow the appeal, even though the emphasis of the arguments now advanced on behalf of Mr Franks is different from that in the appeal tribunal. A question of law arises from the decision of the tribunal. That question is whether it is legally correct for a tribunal to conclude that an individual is not an employee without first determining as a fact whether, on a consideration of all the relevant evidence (including what was said and done, as well as any relevant documents), there was an implied contract of service between Mr Franks and Reuters. If there was not, Mr Franks was not their employee. If there was, then it is necessary to determine his claims for unfair dismissal, redundancy pay and damages for breach of contract. In this case the tribunal failed to address clearly the question whether there

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was an implied contract and so failed to give full and proper consideration to all the evidence relevant to that issue. 34.When the implied contract issue is properly addressed the tribunal may again reach the conclusion that Mr Franks was not an employee, because, like the tour guides in Carmichael, he had not entered into any contract at all with Reuters, whether of service or otherwise. It is not, however, possible for this court to decide the implied contract point. The Court of Appeal is not a fact-finding court. There needs to be a proper consideration by the fact-finding tribunal of all the relevant evidence directed to the issue whether there was an implied contract of service between Mr Franks and Reuters. 35. The appeal should be allowed and the matter remitted for re-hearing by a fresh tribunal. Lord Justice Thorpe 36. I agree.

The President 37. I also agree.

O'Kelly v Trusthouse Forte plc

O'Kelly v Trusthouse Forte plc [1983] ICR 728 is a notorious UK labour law case, which held that a requirement for a contract is "mutuality of obligation" between the parties. Contents

1 Facts 2 Judgment 3 See also

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4 Notes

Facts Some waiters were hired to do dinner functions at the Grosvenor House Hotel. They were called up for banqueting occasions, and in their contracts it was written that they had no obligation to come, and by the same token the employer had no obligation to call them. They tried to organise a trade union, and were dismissed. They argued that they were dismissed unfairly, because trade union legislation (now in the Trade Union (Labour Relations) Consolidation Act 1992 s 162) gave them a right to not be discriminated against as "employees". However the employer argued that the unfair dismissal legislation (now, Employment Rights Act 1996 s 94) only covered "employees" - something different (now defined in ERA 1996 s 230) - which did not cover their situation. Representing the employer was Alexander Irvine QC, later the Lord Chancellor. Judgment Sir John Donaldson MR held the waiters were not "employees" (either of the function hall or the agency) because they did not, technically, have to turn up to work for a shift, and they could be sacked at any time. Sir John Donaldson MR said therefore, that the contract lacked "mutuality" and could not be described as one between an "employee" and "employer". Because they were not "employees" they did not have a right to claim unfair dismissal. And so even though the trade union discrimination legislation protected them, they did not have access to the tribunal to make those rights effective. The legal effect was to put them in the same boat as the "self employed" and that they were not covered by the Act. The practical effect was they had no right to fair dismissal and could be sacked for organising a trade union.

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Airfix Footwear Ltd v Cope

[1978] ICR 1210 Point at issue Whether Mrs Cope was engaged under a contract of employment and therefore entitled to claim unfair dismissal under the Trade Union and Labour Relations Act 1974. Facts This case concerns a company that supplied parts of shoes, glue and other materials to outworkers for them to make up at home as well as instruction and training. Mrs Cope was one such worker engaged to assemble shoe parts by gluing the various materials together. Although there was no specific agreement as to where the work was to be done, in practice she worked at home and the patterns and materials were brought to her house at about 4 oclock each afternoon. Mrs Cope worked each day, five days a week generally, until 12 oclock and if she had not finished she completed the work the next morning. She had been doing this work for seven years, generally five days a week, with occasional breaks when demand was low. The work had previously been done in the factory itself, but by agreement or arrangement had been sent to outworkers for this purpose. The Industrial Tribunal originally hearing the appeal found that the volume of work varied from time to time according to seasonal demand. Payment was on a weekly basis. Mrs Cope was given what were called wages and, at the end of the year, a statement referring to the wages she had earned doing outwork. The company told her not only how to do the work, but also that the glues were highly inflammable; and

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that she must ensure that there was adequate ventilation. She had no entitlement to holiday pay or sick benefit and there were no provisions as to notice of termination of employment. Decision The Industrial Tribunal found that Mrs Cope worked under a continuing contract of service because of the continuing relationship that had built up over the years. The EAT, in dismissing the companys appeal, decided that the Industrial Tribunal was entitled to come to that conclusion. Commentary In arriving at its decision the Industrial Tribunal considered that it was necessary to look at all the factors present and decide whether overall they supported a contract of service. It was irrelevant in this particular case whether the individual daily contracts were separate employments or not. Mr Justice Slynn said .it may well be that if the arrangements between a company and a person are such that . the company may provide or not, as it chooses and the other person may accept or not, as he pleases, it may well be that this is not properly categorised as a contract of employment. If in such a situation the company only delivers work sporadically from time to time, and from time to time the worker chooses to do it, so that there is a pattern of an occasional week done a few times a year, then it might well be that there comes into existence on each of these occasions a separate contract of service, or contract for services, but that the overriding arrangement is not itself a contract of employment, either of service or for services. But these matters must depend upon the facts of each particular case. This case confirms the view that an umbrella contract can exist if a practice of dealing has built up over the years with expectations and obligations on each side. It was only in respect of the overall contract that the question of mutuality of obligation came into effect, and in this particular case it was considered that this obligation was so overpowering that it meant that no
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individual contracts had existed. However, it is often difficult to establish the necessary ongoing mutuality of obligation to change a series of short-term contracts into a single umbrella contract. By contrast see the case of Carmichael v National Power plc (see ESM7200).

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