Duke v Martin Retail Group Plc [1993] UKEAT 647_92_1712

EAT
Duke v Martin Retail Group Plc
[1993] UKEAT 647_92_1712 · 1993-12-17
MR JUSTICE TUCKER: This is an appeal against a decision of the Industrial Tribunal held at Liverpool on 22nd July 1992 that the Appellant was not employed by the Respondents.The Respondents are the Martin Retail Group plc. They own 764 newsagents shops in the United Kingdom. Each shop has a manager. In 195 shops the manager is undoubtedly employed by the company. In the other 569 shops the Respondents contend that the managers are not employed by them, but are contract managers.The contracts under which each type of manager is appointed are very different. The contract for an employed manager is entitled Contract of Employment. It refers throughout to "employment". It provides for payment of an annual salary, for hours of employment, and for such matters as holidays, absence, sick pay and pensions. The contract for the appointment of a contract manager is called an Agreement, and it refers to the manager as an independent contractor. It requires the contractor to employ staff on such terms as he thinks fit, it provides for payment of the manager by commission based on turnover, and it makes no provision for holidays, sick pay or pension. Nevertheless it imposes strict controls on how the business is to be operated.In the present case we are concerned with a contract of the latter kind. It is accepted on both sides that it is a genuine agreement. This is not a case where it is suggested that the agreement is a device or a sham. The Tribunal found that it had been the intention of both parties in March 1990 that the Appellant's existing contract of employment should cease, and that he should become self-employed and that was the whole purpose of the arrangements entered into. The Inland Revenue has accepted that the party to such an agreement is self-employed for income tax purposes. This of course has no relevance as far as we are concerned. And there are several cases binding on us where it has been held that the courts can look behind the label which the parties attach to their agreement in order to decide what is the true relationship which exists between them.We refer to 2 cases which were cited to the Industrial Tribunal in Massey v. Crown Life Insurance Co. [1978] ICR 590 Lord Denning MR said:
"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 it . . . On the other hand if their relationship is ambiguous, and is capable of being one or the other, then the parties can remove that ambiguity by the varied agreement itself that they make with one another. The agreement itself then becomes the best material from which to gather the true relationship between them."
This decision was explained in Young and Woods v. West [1980 IRLR 201 where Ackner LJ said:
"It is by now well settled that the label which the parties choose to use to describe their relationship cannot alter or decide their true relationship; but in deciding what that relationship is, the expression by them of their true intention is relevant, but not conclusive."
The interpretation of this contract has given rise to problems. It has been viewed differently by various industrial tribunals. In the present case, the Tribunal concluded after careful analysis that the Appellant was not an employee, but was a self employed person. Another tribunal sitting at Southampton in February 1992 decided that one of the Respondents' manageresses was an employee. The Company have appealed against that decision. That appeal was listed before us, but unfortunately we had to adjourn it because of the discharge of the manageress' Legal Aid Certificate and the fact that she was neither present nor represented. It is obviously highly undesirable that there should be such differing decision on what are essentially the same facts.In our opinion the determination of the question rests on the written agreement entered into by the parties on the 5th March 1990. It is a pure question of law. Therefore this is an appropriate case for EAT to reach our own view having weighed up all the material before us. In doing so we have been greatly assisted by the careful submissions made by Mr Elias QC on behalf of the Appellants and by Mr Tabachnik, QC on behalf of the Respondent.The difference between an employed person and one who is self-employed, and between what is neatly described as a contract of service and a contract for services has caused problems for the courts for many years.There was a time when it was thought that the appropriate test to apply was that of the degree of control which existed and which was exercised by one party to the agreement over the other. Control is still a factor which must be looked at, but it is no longer the determinative factor.Any examination of the tests to be applied must start with the judgment of Cooke J in Market Investigations Ltd v. Ministry of Social Security [1969] 2QB 173. After a comprehensive review of the authorities, Cooke J. said this at p.184G:
"The observations of Lord Wright, of Denning LJ and of the judges of the Supreme Court 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 to that question is "yes" then the contract is a contract for services. If the answer is "no", then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task."That judgment received high judicial approval in the Privy Council decision in Lee Ting Sang v. Chung Chi-Keung and Another [1990] ICR 409 , and was adopted by Mummery J in Hall v. Lorimer [1992] ICR 739, which judgment has been affirmed by a decision of the Court of Appeal (as yet unreported but of which we have a transcript). We find the approach suggested by Mummery J at p.744F to be a helpful one. It is expressed in these terms:
"In order to decide whether a person carries on business on his own account it is necessary to consider many different aspects of that person's work activity. This is not a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture from the accumulation of detail. The overall effect of which can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another."
With these tests in mind, we examine the contract in greater detail.As we have already observed, it is agreed in Clause 1 that the Respondents granted to the Appellant full right and licence as an Independent Contractor by himself and his employees to operate and manage the Respondents' shop. This has to be compared with Clause 8, which provides that the agreement is personal to the contractor and the contractor may not assign or part with the benefit thereof or sub-contract his rights hereunder. In our view, the combined effect of these clauses is to impose an obligation upon the Appellant to operate and manage the shop - an obligations which may be performed by the Appellant himself, or by his employees. It need not be carried out by the Appellant personally. The effect of Clause 8 is to prohibit the Appellant from assigning his rights to manage the shop or to receive commission, but it does not require him to carry out all tasks in person - he can perform his duties by others, though at the end of the day he remains answerable to the Respondents.Thus there is contained in the agreement, in our opinion, a right to delegate performance of the manager's duties. This right seems to us to be inconsistent with a contract of employment, and more consistent with the appointment of an independent contractor.By Clause 4 of the agreement sub paragraphs (a) to (c) the company takes entire responsibility for the shop premises and for the fixtures and fittings. In Mr Elias' submissions this is inconsistent with self-employed status. By sub-paragraph (e) the company binds itself to supply all goods to be sold in the shop, though by (f) they may authorise the manager to purchase other goods. By Clause 5, it is provided that all stock supplied to the shop by the company shall remain its property until sold - a provision which Mr Elias submits is consistent with the status of an employee. Clause 6 appears to confer a wide discretion on the manager in the running and conduct of the business, but Mr Elias submits that this is limited by the contents of the 1st schedule to the agreement.Mr Elias places reliance on Clause 9, which is in these terms as far as is material:
"It being essential for the proper performance of contractor's duties hereunder the company will permit the contractor to occupy the company's residential property situate (above the shop)."
Mr Elias' argument in this proviso puts a gloss on the proviso of Clause 8 to which we have already referred, and that it indicates that although other people can run the shop, only the Appellant can manage and supervise it. We disagree, We prefer the submission of Mr Tabachnik that Clause 9 is worded in this way in order to prevent the creation of a tenancy, and to grant a manager only a service occupancy. In our opinion the provision of Clause 9 have no effect on the provision of Clause 8.We then look to see what is contained in the First Schedule to the agreement. There is a very material provision at Paragraph (iii) which is in these terms:
"The Contractor shall for the proper conduct of the business: (a)(i)At his expense personally employ persons on such terms as he thinks fit and be responsible for their wages, National Insurance, and holiday remuneration and any other liability of an employer."
Mr Elias recognises the difficulty which this paragraph presents. He concedes that it is the strongest counter-indication to the Appellant's case. Nevertheless Mr Elias submits that it is well out-weighed by other elements. Mr Tabachnik submits that this provision is virtually decisive. He cites the decision of the Privy Counsel in Australian Mutual Provident Society v. I Chaplin 18 A L R 385 and relies on the words of Lord Fraser of Tullybelton at p.391:
"In the present case there appears to be nothing in the written agreement to prevent the Respondent from delegating the whole performance of his work to one or more sub-agents. In the opinion of their Lordships this power of unlimited delegation is almost conclusive against the contract of service."
We also note in Clause (b) an obligation on the contractor to insure against his liability for injury to any of his employees or to third parties.As against this, there are many provisions which impose a tight control over the way in which the business is operated. Thus in particular in Paragraph (j) there is a very detailed obligation to ensure that the shop is kept clean and in good order, and that it should be illuminated at such times as the Company shall direct. In paragraph (g) there is an obligation to ensure that the shop is kept open during normal business hours though there is nothing to prevent the manager from opening for additional hours.By Paragraph (u) the contractor is obliged to require his employees to wear overalls supplied by the Company; there is no obligation upon the contractor himself to do so. But the obligation to wear uniform, or to require others to do so, does not of itself mean that the relationship is one of master and servant. (see e.g. Ready Mixed Concrete (SE) Ltd v. Ministry of Pensions and National Insurance [1968] 2 QB 497 , and B S M v. Secretary of State for Social Services [1978] ICR 894.At Paragraph (v) is a Clause restricting the contractor from being concerned in a competing business; though there is nothing to prevent him carrying on a dissimilar business, nor for carrying on a competing business provided it is outside a 7 mile radius from the shop. This is a type of Clause which is found both in contracts of service and for services, and does not greatly assist us.The Second Schedule of the Agreement provides for remuneration. As we stated at the outset, this is by commission based on a percentage of the total banked turnover of the shop. There is no provision for payment of a regular salary. Mr Elias concedes that this is a pointer to the manager being self-employed, but submits that it is not decisive.In conclusion, Mr Elias submits that having regard to the degree of control retained and exercised by the Company, and to the fact that the manager is not required to make any investment in the venture or to accept the risk of any loss, this is a contract of employment. He submits that it is very much a matter of impression, but that overall, the relevant factors point in that direction rather than the other.There is no doubt, and we have already remarked upon it, that the Contractor did exercise a high degree of control. Mr Tabachnik concedes this, but submits that it is not inconsistent with a contract for services. He says that where a power of control is imposed, it is either to secure proper control of cash, or proper administration of the Company's property, or to promote either the corporate image or the joint venture. He says that the contract is not directed to control of the day to day running of the business. And in any event, the element of control is only one of several factors which have to be regarded.In our view Mr Tabachnik's submissions are correct. He has invited our attention to a number of cases, some of which we have already referred to, where the existence of control did not prevent the contract from being one for services. Thus the truck driver in the Ready Mixed Concrete case, the driving instructor in B S M , and the sub-postmaster in Hitchcock v. Post Office [1980] ICR 100 were all subject to controls, but were all nonetheless held to be independent contractors. Perhaps one quotation will suffice, from the judgment of MacKenna J in Ready Mixed Concrete at p.526:
"It is true that the company are given special powers to ensure that he runs his business efficiently, keeps proper accounts and pays his bills. I find nothing in these or any other provisions of the contract inconsistent with the company's contention that he is running a business of his own. A man does not cease to run a business on his own account because he agrees to run it efficiently or to accept anothers superintendence."
We accept Mr Tabachnik's analysis as being correct, that the controls under this contract were imposed for the reasons he submits. Mr Elias on the other hand submits that that does not take the Respondents' argument very far. He suggests the question is not what the controls exist, but who is imposing them, and that in any event some of them are directed at the management of the shop.Mr Tabachnik summarises his arguments by citing 10 factors, all of which he says support his case.
"1. The contractor's obligation to indemnify the company, contained in clause 11.
2. His responsibility for his own Income Tax and National Insurance.3. His responsibility for complying with VAT regulations.4. His acceptance in Clause 1 that he is an independent contractor.5. The absence of any provision for holidays, sick pay or pensions.6. The absence of any provision for fixed hours of work.7. The freedom of the contractor to carry on any lawful business and to man more than one shop, subject to the 1 mile radius restriction.8. The responsibility of the contractor for his own financial affairs.9. His responsibility for his own working environment and insurance.10. Payment by commission.It may be that some of these factors overlap. In any event, we are not going through a check list, ticking off one item or another. We respectfully adopt the words of Nolan L J in the Court of Appeal in Hall v. Lorimer at p.9 of the transcript where he says this:
"In cases of this sort there is no single path to a correct decision. An approach which suits the facts and arguments of one case may be unhelpful in another."
We have tried to stand back from the details of the present case and to assess what the overall position is. Our clear impression is that the relationship which was here genuinely intended to be created, and which was in reality created, was one of company and contractor - it was a contract for services, not a contract of service. The manager of this shop was self-employed - there was no contract of employment between the Appellant and the Respondents, and the Appellant was not their employee.We have no doubt about this. But if we had felt that the parties relationship was ambiguous, we would have felt entitled to resolve the ambiguity by reference to the very agreement itself, into which these 2 parties willingly entered, and which is not criticized as being a stratagem. That that would have been a proper approach for us to make, appears from the judgment of Lord Denning MR in Massey v. Crown Life Insurance [1978] ICR 590, at page 594.For the reasons we have stated, we are of the opinion that the Industrial Tribunal's decision was correct, and accordingly we dismiss this appeal.