Burrell v Secretary Of State For Employment [1994] UKEAT 369_93_3110

EAT
Burrell v Secretary Of State For Employment
[1994] UKEAT 369_93_3110 · 1994-10-31
MR JUSTICE PILL: This is an Appeal against the decision of the Industrial Tribunal held at Exeter on the 29 October 1992. The unanimous decision of the Tribunal was that the Applicant Mr R Burrell was not an employee and his Application was dismissed.The Applicant had applied to the Industrial Tribunal for a decision as to whether the Secretary of State was liable to make him a payment under Section 106 of the Employment Protection (Consolidation) Act 1978 . The company concerned was R Burrell Limited and it was admitted by the Secretary of State that the company was insolvent within the meaning of that term in section 127 of the 1978 Act. Mr Burrell was put to proof as to whether he was an employee of that company within the meaning of Section 153(1) of the Act.The company had been purchased by Mr Burrell in 1981. In 1986 the capital was increased and Mr Jarman acquired a half share. The business of the company was that of car sales and repairs. The Tribunal found that Mr Jarman had a car, shared profits of the business and attended meetings but did not work in or about the business. The Tribunal considered the evidence before them. Mr Burrell appeared in person, called Mr LeWorthy as a witness and submissions were made on behalf of the Secretary of State.The Tribunal found that Mr Burrell was in fact the Managing Director of the business. At paragraph 7 they found:
"At first Mr Burrell was self employed on a commission basis but after 1986 he ceased to be self employed and drew a sum of money each month which in the latter months amount to £1,400. He deducted tax on a P.A.Y.E basis and his National Insurance Contributions are applicable to an employee."
paragraph 8:
"Mr Burrell was in sole charge of the business, although he attended informal meetings with Mr Jarman."
I extract sections only from that paragraph.
"Mr Burrell obtained from the Motor Agents Association a set of forms of contracts of employment which he issued to employees, of whom there were several at one time. He says he made out one for himself but it has been lost. #We were not satisfied that such had been done for himself. There was no independent evidence whatsoever that Mr Burrell was an employee. No document, contract, minute or entry under 318 of the Companies Act was made."
paragraph 9:
"Mr Burrell acted precisely as a proprietor of a business acted. he was in sole charge. He took order from no one."
The Tribunal then referred to the decision of this Tribunal in Wilson v Trenton Services Station Ltd. [EAT 23 June 1987] and purported to apply the test which the Tribunal had applied in that case. They concluded:
"..and came to the conclusion that Mr Burrell's position was consistent with his being a director and substantial shareholder running what was to a large extent his business. The only other person involved was Mr Jarman who was a sleeping director who did not take part in the running of the affairs of the company. We decided that Mr Burrell did not come within the statutory definition of an employee and the application was dismissed."
In his Notice of Appeal Mr Burrell submits that the Tribunal erred in law in failing to find that he was an employee. In substance the allegation is that their finding of fact and their conclusion was perverse. He submits that they erred in:a) "equating control of the day to day running of the business with control of the business itself by its shareholders; andb) failing to take any or any adequate account of the voting power of the Appellant's co-shareholder, Mr Jarman."Mr Burrell has presented his submission to us in a careful and helpful manner, though as we pointed out to him and as he recognises, the tribunal of fact is the Industrial Tribunal, we can intervene only if there is an error of law. A perverse conclusion can amount to an error of law. Mr Burrell drew attention to the features of the case which were favourable to a finding that he was an employee; he referred to the facts found by the Industrial Tribunal and submitted that the proper conclusion to be drawn from those facts was that the Limited Company was an entity and he was an employee of the company. He added that in addition to the matters stated by the Tribunal, he had paid money into a pension fund, as an employee.He submitted that while he made day to day decisions, anything major required the agreement of Mr Jarman. He submitted that he did not have total control of the company, Mr Jarman was able to and did on many occasions veto proposals which he, Mr Burrell, had made and he said that he had vetoed proposals which Mr Jarman had made. The Tribunal had disregarded the evidence in that respect and had wrongly treated him as the sole proprietor.On behalf of the Secretary of State, Mr Catchpole has submitted that the Tribunal were entitled to come to the conclusion they did on the evidence before them. Mr Catchpole referred us to the case of Wilson and also to the decision of this Tribunal in Robert Eaton Limited v Secretary of State for Employment [1988] IRLR 83. Giving the judgment of the Tribunal, Sir Ralph Kilner-Brown stated that:
"Without presuming or intending to lay down principles or guidelines because every case depends on its own facts we have over the years been able to identify some of the factors which crop up in these cases. In the first place Industrial Tribunals have to bear in mind that generally speaking, a director of a company is the holder of an office and is not in employment ((see McMillan v Guest [1942] AC 562). Evidence is required to establish that a director is employed by a company. Any descriptive term such as managing director or technical director may provide the first indication of employment. Obviously the position of a properly appointed managing director or the so-called working director who draws a weekly wage is one which is more likely to present an arguable case for a contract of employment. In this context the most pertinent question is whether or not there was an agreement to employ a person as managing director which should either be an express contract or minuted at a board meeting or noted by a memorandum in writing. This is not conclusive. It may then have to be ascertained whether remuneration is by way of salary or by way of director's fees. If the latter, it points away from employment. Then it might be appropriate to consider whether there was remuneration fixed in advance or merely made on an ad hoc basis. If the latter, this points away from employment. In some cases remuneration may be identified as gratuitous and not by way of entitlement. Again this would point away from employment. Finally there is the important consideration of the functions actually performed by the director. Was he merely acting in a directorial capacity or was he under the control of the board of directors? An Industrial Tribunal may not find it necessary to pose all of these questions and they may identify other factors as relevant. It is entirely a matter for the Tribunal to approach the problem as it thinks appropriate."
Having considered the facts in that case, the Tribunal came to the conclusion:
"that the decision was one which was open to the Tribunal or any reasonable Tribunal."
We have considered the evidence in this case, the findings by the Tribunal and the submissions of Mr Burrell. It is right to say that there were facts in this case which pointed in each direction, and Mr Burrell has drawn our attention, as no doubt he drew the attention of the Industrial Tribunal, to the facts which favoured his submission that he was an employee. Equally, it is inescapable that there are facts pointing in the opposite direction. The Tribunal obviously had regard to the absence of any documentary evidence in the company's records to a contract of employment or to Mr Burrell being an employee. They had regard to the position, as they found it to be, in relation to the management of the company. It has to be noted that Mr Jarman did not give supporting evidence.We have come to the conclusion that it was open to the Industrial Tribunal on the facts of this case to find Mr Burrell was an employee. We can find no whiff of perversity in the finding which they reached on the evidence before them. We deal with only one further matter and that is out of deference to the submissions of Mr Catchpole who drew to our attention the statutory scheme with respect to Pay As You Earn and to National Insurance payments. It appears to have been assumed hitherto that renumeration under a P.A.Y.E. scheme and payment of Class 1 National Insurance contributions might point to a director being an employee. Mr Catchpole has referred us to the Companies Act 1985 Section 311 and to the Income and Corporation Taxes Act 1988 Section 202A, 202B and Section 203 in support of the submission that renumeration and taxation under P.A.Y.E. is neutral because even if a director is an office holder, as distinct from an employee, tax has to be deducted at source.He also referred us to Section 1(2) and Section 2 of the Social Security and Benefits Act 1992 which insofar as is material re-enacts earlier legislation. That provides that Class 1 contribution shall be received from employed earners, and by virtue of Section 2:
"employed earner" means a person who is gainfully employed in Great Britain either under a contract of service, or in an office ...with emoluments chargeable to income tax under Schedule E."
That is the Schedule appropriate where tax is deducted under P.A.Y.E.This point was not taken by the Secretary of State before the Tribunal and we do not find it necessary or appropriate to make any finding on the point in this case. The decision of the Industrial Tribunal stands without reliance upon this point. We refer to it in this judgment because Mr Catchpole has made submission upon it and it would be open to parties in subsequent cases before Industrial Tribunals to base submissions upon those Sections.For the reasons we have given, this Appeal must be dismissed.