Leigh Carr (A Firm) v Ahuja [1995] UKEAT 135_95_0707

EAT
Leigh Carr (A Firm) v Ahuja
[1995] UKEAT 135_95_0707 · 1995-07-07
MR JUSTICE MUMMERY (PRESIDENT): This is the preliminary hearing of an appeal against the decision of the Industrial Tribunal held at London (North) 28th November 1994.The Tribunal dealt with a preliminary point in a claim for unfair dismissal brought by Mr A Ahuja against Leigh Carr. They also dealt with a claim for holiday pay under Wages Act.The Tribunal unanimously decided in favour of Mr Ahuja on both points. They found that he was an employee of Leigh Carr and therefore entitled to bring a claim for unfair dismissal. They also held that under the Wages Act he was entitled to be paid for the month of April 1994 in the net sum £3,540.00 and was entitled to be paid for holiday pay not taken at the date of termination of his employment, amounting to the net sum of £2,409.96.The extended reasons for those decisions were sent to the parties on 3rd January 1995. Leigh Carr appealed against that decision, both on the point of Mr Ahuja's status as an employee and on the point of his entitlement to accrued holiday pay.On the hearing of the appeal today, Mr Kennedy has represented the firm of Leigh Carr. He has informed us that events have moved forward since the Notice of Appeal served in February 1995. The hearing on the merits took place on 22nd March 1995. The Tribunal found that Mr Ahuja's dismissal was unfair. But payment of the compensation, as assessed, was deferred until the decision of this appeal had been given.The purpose of the preliminary hearing of the appeal is to decide whether there is an arguable point of law raised on the appeal. This Tribunal only has jurisdiction to entertain appeals on points of law. If the Notice of Appeal does not reveal an arguable ground, the appropriate course is to dismiss the appeal.The case for the appellants is clearly set out by Mr Kennedy in his skeleton argument. He gave helpful answers to the questions which we asked him during the course of the oral hearing. In order to decide whether his points raise an arguable legal point, it is necessary to consider the facts found by the Tribunal.The Tribunal found these facts: Mr Ahuja was introduced to Leigh Carr by Mr Sacker who was at that time a salaried partner in the firm. On 1st August 1990 Mr Ahuja started with Leigh Carr. Following various discussions an agreement was drawn up between the parties. That agreement is dated 18th December 1990. That provides it was agreed as from 1st August 1990 Mr Ahuja was "to be a partner with Messrs Leigh Carr receiving a share of profit equal to £57,500.00 per annum together with the items detailed in the Schedule below such share of profit being payable monthly in arrear on the last day of each month commencing on the 31st Day of August 1990 less a full provision for estimated Schedule D Taxation and Class 4 NIC."The Schedule refers to benefits in addition to the share of profit, a car and payment of standing and overhead charges excluding fuel consumption; bank holiday entitlements, 5 weeks holiday in the year ending 31st July 1991 and an amount in year one not exceeding £1,375.00 to purchase Private Health Cover, pension and insurance.The agreement goes on:
"You will not be entitled to any of the assets.
It is agreed that you should not be liable for any losses of the partnership or for any debts and liabilities due or arising from any act or omission of the partnership whether prior to or after the date hereof and shall be indemnified by the existing partners against all such losses debts liabilities or claims.You will continue to abide by and be bound by the Particulars of Employment and Staff Rules relating to employees of the partnership so far as they have not been superseded or amended by the terms hereof.The partnership may be determined by three months' written notice on either side but such notice shall not dissolve the partnership so far as concerns other partners as between them."There are other provisions relating to the activities of Mr Ahuja after the termination of the partnership agreement.At the time of the agreement, it was intended that Mr Ahuja would become an equity partner in the firm within three years of joining the firm. The Tribunal set out the terms (which I have already read in full, so far as they are relevant). They said that Mr Ahuja was "tax specialist". As indicated in the agreement he was to paid on the basis of Schedule D taxation (which is normally applicable to self-employed people).He worked for the firm. He was put on the firm's notepaper as a partner. He was listed in professional directories as a partner. Both by the rest of the firm and Mr Ahuja himself he was held out to the world as a partner of the firm.There were problems in 1994. There was an investigation by the Inland Revenue. The question of the tax treatment of Mr Ahuja and other salaried partners (taxed on Schedule E) arose. There were problems between the equity partners. This all eventually led to the dissolution of the partnership.A decision was made, which was notified in a letter written by Mr Sacker on 13th April 1994. With effect from 31st March 1994 Mr Ahuja's income, being a defined share of profit, would be paid under Schedule E. Mr Ahuja was not involved in that decision.On 29th April 1994 there was a meeting of the equity partners. They decided to dissolve the partnership. Mr Ahuja was not notified of the meeting. He was not present at it. On 30th April 1994, he wrote a letter to the partners of Leigh Carr saying:
"Dear Sirs,
Under the terms of my contract of employment, I hereby give notice effective today of termination of my employment."It was said that that was the first time that he used the word "employment". A letter was written on 3rd May 1994 by Mr Sacker telling Mr Ahuja that the partnership was dissolved at the meeting of 29th. He would not receive his drawings for the month of April pending clarification of the various outstanding matters.The Tribunal dealt with the holiday point, before they dealt with the employee status. There, said Mr Kennedy was part of the confusion that crept into their decision. The first point they decided related to carrying forward holiday. The terms relating to staff of the firm applied to Mr Ahuja. They provided that there was no carry forward of holiday accept by agreement of the partners. Mr Kennedy has referred to the terms. They sayin clause 7(7):
"7) If the employment is terminated before holidays have been taken or if holidays have been anticipated, accrued holiday pay at the prevailing rate will be added to or deducted from the final salary payment."
It is provided in clause 7(1):
"1) The holiday year is from 1st May to 30th April. No leave may be carried forward into the following year without prior written authorization."
There was no prior written authorization in this case. Therefore, it was argued, he was not entitled to his claim for holiday not taken but carried over from a previous year.The Tribunal found that in practice, in Mr Ahuja's case, he was allowed to carry forward his holiday. At the end of the period when he was a partner there were 14.75 days not taken. The net value of that was agreed. The Tribunal's decision in paragraph 8 was as follows:
"... The claim under the Wages Act which was still disputed related to holiday pay and despite what is said in the written agreement between the Applicant and the Respondent it is clear to us from the evidence that the practice was for him to be allowed to carry forward his holiday and we have no hesitation in saying that at the end of his period as a partner in the Respondent firm he was entitled to whatever holiday was then outstanding including holiday not taken from the previous year."
What is wrong with that decision?Mr Kennedy's submission is that there is an error of law. He argued that, under the particulars of employment which applied, written authorization was needed to carry forward leave. If, as the Tribunal went on to hold in relation to the unfair dismissal claim, Mr Ahuja was an employee, then he would have had to receive permission from a partner to carry forward the leave. He never sought permission. His evidence to the Tribunal was that he carried his leave forward as a matter of course. Mr Kennedy submitted that the Tribunal did not give sufficient weight to the reality that the reason for this was because Mr Ahuja was considered, both by himself and his fellow partners, to be a partner of the firm. He completed his own leave forms. They were not checked or authorised by any of the partners. So, if he was an employee, contrary to the understanding of his that the fellow partners, he could not claim this entitlement because he had not sought or obtained the necessary written authorization. It was said that the decision betrays an inherent contradiction. In the part concerning holiday pay, they look at his position as a partner and hold that he is entitled to it, because he was allowed in practice to do this. But they also decide, for reasons given later, that he was an employee. If they had applied the conditions applicable to an employee, they would have disentitled him to holiday pay, because he had not got prior written authorization. Mr Kennedy submits that the Tribunal became confused in their own minds as to the true status of Mr Ahuja in the firm. They got into this position by making the decision on the Wages Act prior to the decision on the unfair dismissal aspect that he was an employee. They had then failed to correct the first part of their decision to conform to the second part of their decision.In our view, there are no errors in this part of the decision. As we see the legal position, the Tribunal assessed it correctly. The position was that under the agreement, whether Mr Ahuja was called a partner or not, the terms of the particulars of employment and staff rules applied to him. As applied to him they provided that he could carry over leave but not without prior written authorization. That is a condition inserted for the benefit of the employer, to make sure that employees do not carry forward un-taken holiday into the following year without the agreement of the employer. They cannot do it unilaterally. But the Tribunal found he was allowed to do this. They say this in both paragraph 7 and 8. The employers did allow him to carry forward his holiday. That is so whether you call them his employers or his partners. The fact is, that under the terms applicable to him, he was allowed to do what he did. It is not open to the other party to the contract to say, even though he was allowed to do this, he cannot claim the consequence. They did not insist on prior written authorization. If a condition in an agreement is inserted for one party's benefit, it is open to that party to waive it. In this case the other party waived it by allowing him to carry the holiday forward. There is nothing legally wrong with this decision on the holiday point.We have reached the same conclusion on the status of Mr Ahuja in the firm, though we agree with the Tribunal that that position is more complicated than the holiday point.The Tribunal refered to the relevant authorities. Mr Kennedy accepts that the self-direction on law was correct. What he says is incorrect is the conclusion which, in his submission, is perverse. He says that applying correct test to the facts would produce the opposite result. No reasonable Tribunal could have come to this decision.We do not agree. It is clear from paragraphs 12 and 13 that the Tribunal considered all the relevant factors, those that showed or tended to show that he was self-employed and had a partner status, and those that tended to show that he had an employment status. They referred to the fact that on partner/self-employed side that he was held out to the world as a partner. He had a liability to anyone dealing with firm, having been held out as a partner. He had got himself taxed on the Schedule D basis which relates to self-employed people. On the other side, the Tribunal came to the conclusion that there were more factors pointing to him being an employee. Although his remuneration was referred to as a fixed share of profit, it was fixed remuneration, not linked to profits. It was reviewed for increases on an annual basis with the salaries of employed staff. He was not an equity partner with a percentage share or fraction of the profits. He had no capital in the firm. He was not at risk as to loss. He was indemnified under the agreement as to losses. The indemnity was given by the other partners. He was subject to the same terms and conditions of employment as employees. Various other aspects of his status were more those of an employee. He had no bank mandate to write cheques on behalf of the firm. He was not a party to the main partnership agreement. He had no right to dissolve the main partnership. Termination of his engagement did not effect the continuation of the main partnership. He was not involved in the management of the firm. He did not attend partners' meetings. He was not asked to attend the meeting which dissolved the partnership, because it was considered that he did not have any say or interest in it.It is not surprising that, having listed all those matters, and looked at the picture as a whole, the Tribunal's view was that he was called a partner because it suited both parties to increase his status in that way. In reality, he was a senior employee. The general basis of his engagement was as an employee.In his skeleton argument and in his oral submissions, Mr Kennedy emphasised the points against that conclusion. He said that the Industrial Tribunal placed too much emphasis on the factors which indicated employment, and not enough emphasis on the points or factors that indicated a partnership. His skeleton argument sets out the factual background already summarised. He emphasised the fact that Mr Ahuja's name was on the firms' notepaper as a partner. He was listed as such in professional directories. He was held out as a partner. Although he was indemnified, the indemnity would only have protected him to the extent that the other partners had resources. He was paid drawings as fixed share of profit, and as a competent self-professional declared himself these sums to the Inland Revenue as earnings from self-employment. More regard should have been had to these central points. In conclusion Mr Kennedy said that he was a partner. He was held out as such. He was taxed as such. He took drawings as such. All those are inconsistent with him being an employee.We reject those arguments. If the Tribunal had ignored them there might have been an error through their failure to take in to account matters that were relevant to the issue whether he was employed or self-employed. The Tribunal, in our view, made a careful consideration of all the relevant factors for and against the question of employment. They came to a view, on giving a correct self-direction in law, which they were entitled to come to on the evidence. This is essentially a question of judgment on the facts. There is no error of law. We dismiss the appeal at this stage.