Leeds City Council v Sutcliffe [1994] UKEAT 401_92_2501

EAT
Leeds City Council v Sutcliffe
[1994] UKEAT 401_92_2501 · 1994-01-25
MR JUSTICE MUMMERY (PRESIDENT): This is an appeal against a decision of the Industrial Tribunal sitting at Leeds on the 13th April 1992. The Tribunal heard an application by Mrs Sutcliffe claiming entitlement to a redundancy payment. The claim was made by an Originating Application presented to the Industrial Tribunal on the 12th December 1991. In that application Mrs Sutcliffe stated that she was a part-time lecturer employed by the Leeds City Council from September 1970 until October 1991 doing normal basic weekly hours of 9 1 / 2 hours work. She stated her grounds of complaint quite simply:
"I was employed with Leeds City Council from September 1970 to October 1991. I was dismissed when the number of fee-paying students declined. I have not received a redundancy payment."
The claim was contested by the Council. The Tribunal decided by a majority that Mrs Sutcliffe was entitled to a redundancy payment and the matter was adjourned to enable the parties to negotiate the amount of the payment.The Council were dissatisfied with the decision and by a Notice of Appeal dated the 1st July 1992 appealed on the grounds that there were errors of law in the decision of the majority of the Tribunal.The issue before the Tribunal was not clear from the Originating Application. That simply stated the claim to redundancy payment. The issue became clearer from the Notice of Appearance of the Council. It stated that Mrs Sutcliffe had been employed by the Council since 1974 under distinct and separate concurrent contracts working within different areas of Leeds and at different establishments. The hours of each separate contract varied between two and six hours and were of different lengths. The Council claimed that during her employment Mrs Sutcliffe had not been employed under a contract of employment, normally involving employment for eight or more hours a week. The Council did not consider that the hours of the separate contracts could be aggregated to allow eight or more hours per week.When the matter came before the Tribunal it was conducted in a sensible, reasonable way by all concerned. The matter was broken down to three issues. On this appeal we are only concerned with one. Concessions were made that shortened the length of the hearing. Most of the important facts were agreed. Evidence was given by Mrs Sutcliffe and by Mr Hobbs, Mrs Perry and Mrs Wright on behalf of the Council.In its decision the Tribunal stated that the application was for redundancy payments and that, unfortunately, there was a division of opinion among members of the Tribunal about the result. The majority were in favour of Mrs Sutcliffe. The Chairman dissented. The crucial point which has emerged on this appeal is this: did the Tribunal focus its decision on the correct question? If the Tribunal did not focus on the correct question there is likely to be an error of law, since in law it is usually impossible to arrive at a correct answer without asking the correct question.Before we go to the details of the decision and the submissions we should say that the issue between the parties has been clearly and correctly identified on this appeal. The issue is this: was Mrs Sutcliffe employed by the Council as a part-time lecturer over a period, which is accepted to be not less than 5 years; under a number of separate, concurrent contracts each of which provided for less than 8 hours work; or was she employed under a single contract or series of single contracts, following one another in succession, under which the total of hours worked was not less than 8 hours?Certain matters are common ground. The first is that the relevant statutory provisions are contained in paragraphs 4, 5 and 6 of Schedule 13 to the Employment Protection (Consolidation) Act 1978 . It is common ground that, by virtue of those provisions, Mrs Sutcliffe is entitled to succeed in her claim for redundancy payment if she can establish that there was a single contract or succession of single contracts for a period of not less than 5 years under which she worked not less than 8 hours weekly. It is also common ground that, for the purpose of determining this question, it is not permissible, in order to arrive at the relevant figures of hours worked, to aggregate the number of hours worked under separate contracts. This is derived from the decision of the House of Lords in Lewis v. Surrey County Council [1988] 1AC 323 - see Lord Hailsham's speech at 332G and Lord Ackner's speech at 339 to 341. It is not permissible in this exercise to add or aggregate the hours of employment pursuant to separate contracts with one employer in order to achieve 8 hours per week.It is common ground that on the definition contained in Section 153(1) of the Employment Protection (Consolidation) Act 1978 a "contract of employment", means a contract of service, which may be express or implied, and (if express) may be oral or in writing. With those points in mind it is next necessary to examine the decision. The important parts of the decision are those which identify the issue which the Tribunal thought that it had to decide. In paragraph 9 the Tribunal stated:
"9. The third matter that was raised by the respondents [the Council] was whether or not the applicant [Mrs Sutcliffe] was entitled to aggregate the various teaching contracts under which she was employed to make a total of more than 8 hours, or whether the tribunal should look at the individual teaching contracts separately in which event as no one contract was for more than 8 hours per week the application would fail. The applicant of course argues that those contracts should be aggregated.
10. Those are the issues that fall to be determined."The plural refers back to a first and second issue in paragraph 7 and 8 which we are not concerned with on this appeal.The facts are set out in paragraph 11 and can be conveniently summarised as follows: Mrs Sutcliffe was a talented lace maker. She attended lace making classes run by the Council's Adult Education Department as a student. When a teacher fell ill and was unable to continue Mrs Sutcliffe took her place. Her fame spread and she began to conduct classes all run by the Council. By 1974 she was working at various establishments in various parts of Leeds teaching for more than 8 hours a week in total. That situation continued up to September 1990 by which time she was teaching at three different establishments at Featherbank, Guiseley and Otley. The classes had been for 2 hours at each of those establishments and combined with the 2 hour class she also had done at Pudsey. That took her weekly hours up to 8.During the summer of 1991 the Education Department of the Council gave consideration to their general policy about the provision of Adult Education. They changed the policy to allow the budget to be targeted at those in the community who were considered most disadvantaged - the unemployed - ethnic minorities and women returning to work. Lace making did not fall within that target. When the policy was imposed on the various centres where Mrs Sutcliffe had worked, it was decided that lace making classes could no longer be subsidised. From October 1991, after classes had been closed, Mrs Sutcliffe found that she no longer had any lace making classes in the region of the Council.The Tribunal also noted the administrative basis on which the Council ran their Adult Education system. For administrative convenience and efficiency the Council divided the region up into different areas. Those areas decreased over the years as different areas were amalgamated. The Council worked on the basis that each area was autonomous, so far as the provision of Adult Education was concerned. Each area had its own budget. It was up to each area to decide how the budget was to be allocated between the various centres operated and various classes were run by each of the centres. The autonomy of each area was subject to the general policy decisions of the Council. The consequence of this administrative arrangement was that, when Mrs Sutcliffe came to be employed, for example, at the Adult Education at Guiseley, she would make application to that centre; the salary would come out of the budget allocated to that area and accordingly, the approach by Mrs Sutcliffe, when making application for the teaching job at Guiseley, would be made not to the Head Office of the Council, but to the Guiseley centre.The Tribunal found that, in consequence of those administrative arrangements, the written contracts issued to Mrs Sutcliffe in respect of each teaching position were issued out of the area to which the position related.There was evidence that Mrs Sutcliffe's wages, which were identical in respect of each of her teaching positions, were consolidated by the Council's Wages Department. She was paid in one cheque, not apportioned between the various teaching posts held by her.There was evidence from Mrs Perry, on behalf of the Council, that it was theoretically possible for Mrs Sutcliffe's employment in respect of one of the teaching posts to be terminated, by way of dismissal, for example, without it affecting one of the other teaching posts. In the event, however, all the contracts were terminated at the same time as a result of the central policy decision of the Council.Those are the essential facts found by the Tribunal. There is one further fact they found in paragraph 15. Whenever teaching posts were offered to Mrs Sutcliffe, a contract was sent to her specifying the details of that teaching post. Each individual contract was accompanied by a letter, in the form of an exhibit R2. At paragraph 1 on the second page of that letter of appointment it is provided:
"The weekly hours of class contract are as detailed on the enclosed contract, which also indicates any weekly hours of authorised attendance at the College or Centre, in addition to that required as class contact time. No additional payment will be made in respect of hours required for preparation of schemes of work, setting and marking of examinations."
In the light of those facts the Tribunal at paragraph 18 turned to what they described as the third issue and said:
"18. that is whether or not we can properly aggregate the different contracts issued from different areas for whom the applicant worked.
19. It is on this issue that we are not able to agree upon and upon which the chairman dissents."The Chairman, who was responsible for drafting the decision, set out what he understood to be the decision of the majority.The majority, drew a distinction between the facts of Mrs Sutcliffe's case and those of Mrs Lewis in the House of Lords case Surrey County Council v. Lewis . They stated that the cases were distinguishable in that Mrs Lewis had different contracts at different grades; Mrs Sutcliffe's position was identical in respect of each of the teaching posts she enjoyed. The case of Lewis also shows another significant difference, it was conceded in the case of Lewis that there were separate contracts. The decision states that the majority took the view that the area divisions were an artificial administrative device which did not affect the fundamental contractual position between Mrs Sutcliffe and the Council. They referred to the fact that the Council did not inevitably issue separate written contracts for the different areas. There were occasions on which two separate contracts were issued in respect of Mrs Sutcliffe's work in the same area. The majority found that this was an indication that the Council did not bind themselves to separate regions for separate contracts and were able on occasion, to sub-divide the contractual situation in respect of the area. This pointed to the artificiality of the division in the first place.They made a point about the amalgamation of areas. They pointed out that this was significant, as the matter of contract should not depend on questions of luck. In their view, this demonstrated the contractual artificiality of the Council's argument.Paragraphs 24 and 25 contain important statements of the majority:
"24. The majority also point to the fact that all of these contracts came to an end at the same time as a result of a uniform policy being imposed upon the different areas by the Leeds City Council. The fact that the contracts could be brought to an end uniformly once again in the view of the majority shows that there is a uniformity in the contractual position and that the division between the various contracts is an artificial division.
25. Finally, the majority take comfort from the judgment of Lord Ackner in the Lewis decision . . and they would find for the reasons which have just been outlined that in fact there was a unifying contract of employment collateral to the separate contracts of the type referred to an "umbrella contract" and the majority would say that there is in this case an umbrella contract as between the Leeds City Council and Mrs Sutcliffe."The view of the majority was, therefore, was that she qualified for redundancy payment.There are two important points. The first is that the statement of the issue for decision in paragraph 9 and, more significantly, in paragraph 18, does not appear to be a correct identification of the issue between the parties. As we have mentioned, it is common ground that the issue is whether there were separate contracts or one contract. The issue stated at paragraph 9 and 18 is whether, assuming there to be different contracts, the hours worked under the different contracts, can be aggregated for the purposes of redundancy entitlement. Both parties agree that is not permissible in the light of the House of Lords decision in Lewis . Secondly, it does not appear from paragraphs 20 to 26 that the majority made a clear finding that there was one contract which would entitle Mrs Sutcliffe to redundancy payment. Indeed, it appears that they proceeded on the basis that there were a number of separate contracts which they regarded as artificial divisions of the contractual situation. It also appears that they regarded as existing a number of separate contracts unified by what is described as a collateral "umbrella contract". This "umbrella contract" was apparently additional to the separate contracts and could provide the means by which Mrs Sutcliffe could succeed in establishing the necessary 8 hours per week. There is a significant difference in law and in fact between a succession of concurrent contracts, accompanied by a collateral unifying contract of employment, and an analysis which produces a single contract. The collateral or "umbrella contract" analysis produces a contract additional to the separate contracts. The single contract theory reduces what appears to be separate contracts to one contract. There is no clear finding that there is just one contract or a series of single contracts in succession.The view of the Chairman is expressed in paragraphs 28 and 29. That is relied on to some extent by Ms Gay, representing Mrs Sutcliffe, to clarify possible obscurities in the decision of the majority. The Chairman stated that the agreements reached with the areas separately, with separately determined teaching hours, and separate terminations by each of the areas indicated that there were separate contracts. He said in paragraph 29 that he looked to see, in accordance with the Lewis case, in particular the speech of Lord Hailsham, to see whether there was a single relationship contained in a single contractual complex, whether oral, in writing or implied, and whether or not contained in a single document or number of documents. He came to the conclusion that there was not a single contractual complex. There were a number of separate contractual arrangements. That being the case the Chairman thought were that Mrs Sutcliffe did not qualify for a redundancy payment.It has been submitted that, on the basis of those remarks, it must have been clear to the Tribunal that the issue was whether there was one contract or a number of concurrent contracts. On those rulings we have heard excellent arguments on each side. On behalf of the Council, Mr Clayson asked us to allow the appeal and to dismiss Mrs Sutcliffe's for redundancy payment. His submissions were briefly these. There was no real dispute about the facts before the Tribunal. They cannot be disputed here. The question whether there was one contract or a number of separate concurrent contracts of employment was a question of law. The majority of the Tribunal came to an insupportable decision in two ways. First, they appeared to think that they could aggregate the hours of work under the separate contracts to produce the 8 hours. We need say no more about that point, as it is conceded by Ms Gay, on behalf of Mrs Sutcliffe, that that is not permissible.Mr Clayson made a further point arising from paragraph 25 of the decision. He submitted that it appeared that the majority thought that they could imply a unifying contract of employment, collateral to the separate contracts, and rely on that to provide the 8 hours that Mrs Sutcliffe needed to succeed. His submission was there were no facts to support such a contract. There was no express contract to that effect. It can only be a matter of implication. How could such an implication be made? Ms Gay sought to make such an implication from the documents which related to the terms of service Mrs Sutcliffe at the separate centres and submitted that it was possible to imply a succession of "umbrella" or unifying contracts. There may be difficulties with this as a matter of general law. Implications of contracts are not to be made simply because it is convenient or reasonable to do so. Mr Clayson had a further point, namely it was difficult to see what content the "umbrella contract" could have and how it could be characterised as a contract of employment.These were impressive submissions. It is difficult on the material available to see how this implied "umbrella contract" could exist. This does not come within the main part of Lord Ackner's speech at page 343E of the decision in the Surrey County Council v. Lewis case where he observed that it would be open to an industrial tribunal tofind that what purported to be multiple contracts were, in reality, one single contract.He was referring to the case where a situation had been set-up in which the employer was attempting to disguise the true nature of the legal relationship between him and his employee in order to avoid liabilities as an employer. Lord Ackner took the view that it would be possible, in a suitable case, to penetrate what he described as the superficial disguise, look to the substance of arrangements and not be seduced by the form of them. He said this also:
"that if the facts fitted, it would also be open to an industrial tribunal to find that, even though there were separate contracts, there was also a unifying contract of employment collateral to the separate contracts, of the type which has been referred to as an "umbrella contract" of employment (see O'Kelly v. Trusthouse Forte plc [1984] QB 90 124H) under which the minimum hours requirements were satisfied."
The difficulty in this case is to identify from the evidence given to the Tribunal what would be the factual and legal basis for implying such a contract and how any contract implied would be a contract of employment.Ms Gay submitted that the appeal should be dismissed. She made submissions on the relevant law. She relied upon passages in the case of Lewis for the proposition that it is essential to have regard to the reality of the contractual situation and not just to the different documents involved. On the evidence that a Tribunal would be entitled to conclude, in an appropriate case, that there existed a single implied contract of service, or one composite contract for 8 hours or more, that would satisfy the hours requirement of Schedule 13. She highlighted a particular passage in Lord Ackner's speech at page 334 that, if the division of the employee's activities between departments was solely for organisational or budgetary reasons, the reality of the relationship might well be that there was a series of single consecutive contracts.She correctly, identified the issue as to whether there was one contract or a series of single contracts on the one hand, or, on the other hand, a number of concurrent contracts. She sought to support the view that Mrs Sutcliffe was entitled to redundancy payment by focussing the facts which she said supported the implication of a single contract made from time to time by the Council. That governed all the arrangements between the Council and Mrs Sutcliffe in relation to the appointments for the separate areas. She pointed out that the employment was on the same terms imposed by the employers as to hourly rates, termination notice, pay claims, discipline and grievances. Only one pay cheque was sent to Mrs Sutcliffe, by the Council. The employment was subject to budgetary constraints on the employers. All the employment was dependent on the Council's general policy relating to the provision of Adult Education. She emphasised that the division of the Council's regions into areas was for reasons of administrative convenience and efficiency. Depending upon the division made by the Council, one Adult Education would be in one area together with another centre at one time and in a different area with other centres at other times. She gave examples from the documents of how that in fact had happened. She pointed out that the employment at different establishments in one area was regarded by the Council as being subject to one contract, yet on one occasion they issued two separate documents in respect of employment within one area. Applying the law to those facts she argued that this was a case in which the majority were entitled to come to the conclusion that there should be implied a single composite contract contained in the several documents. Alternatively, there was a collateral "umbrella contract" of employment.The separate contracts mentioned in the submissions and earlier in this judgment were contained in a list of documents provided to the Tribunal. The documents date back to 1985.The submission of Ms Gay was that the Tribunal was entitled to find on the facts that the analysis weighed in favour of a single contract, rather than a succession of concurrent contracts. The argument was well put. The overall submission was that, in the light of the facts found and the relevant law, there was no proper basis for this Tribunal to overturn the decision of the majority that Mrs Sutcliffe had at any one time only one contract with the Council, a contract which gave her entitlement to redundancy payments.Ms Gay said, in response to our questions, that, if the appeal were to be allowed we should not dismiss Mrs Sutcliffe's claim. The matter should be remitted to the Industrial Tribunal. That is the course we propose to take. We shall make an order allowing the appeal and remitting this matter to a different industrial tribunal. Why do we do that? It should be apparent from what has been said in this judgment that there appears from the statement of Full Reasons to be a serious doubt whether the Tribunal, or alternatively, the majority of the Tribunal, correctly addressed the relevant issue. We are reluctant to send cases back for a re-hearing, particularly when, as here, the termination of employment occurred as far back as October 1991. The hearing took place in 1992. We are now near the end of January 1994. It is unavoidable, however, if the decision appears to be one which never focused on the true issue. At the expense of repetition, we say that the reason why this Tribunal, in its majority, fell into error of law was that they thought they had to decide whether they could aggregate the hours under separate contracts, running concurrently between the Council and Mrs Sutcliffe, or, alternatively that the issue was, whether in addition to separate contracts, there was an additional unifying "umbrella" contract of employment providing for at least 8 hours work a week. As will be appreciated from our statement of the position the real issue between the parties was neither of those; it was whether there was, as the Council contended, a succession of concurrent separate contracts, or as Mrs Sutcliffe contends, a succession of single contracts. That may sound legalistic. We are sorry if it does. It is not legalistic. It is fundamental to the proper solution of this problem. The matter will have to be re-argued on fact and law before another tribunal. I emphasise that the account of the facts given are those that have been found by the Industrial Tribunal. That does not necessarily prevent a tribunal at a later hearing from hearing additional evidence. In so far as the facts have been agreed it may not be possible to re-open them. There may, however, be documents available on discovery which would throw light on the issue as identified. We say no more about the merits of the case or the likely outcome of the re-hearing.For all those reasons the appeal is allowed. This matter is remitted for re-hearing by a different tribunal.