Rowden v Secretary Of State For Trade & Industry [1996] UKEAT 1228_95_0603

EAT
Rowden v Secretary Of State For Trade & Industry
[1996] UKEAT 1228_95_0603 · 1996-03-06
MR JUSTICE MUMMERY (PRESIDENT): This is the preliminary hearing of an appeal by Mr Robert Rowden against the decision of the Industrial Tribunal held at Exeter on 12 September 1995.The Tribunal, by a majority, held that Mr Rowden was not an employee and was therefore not entitled to the redundancy payment, which he claimed against the Respondent, the Secretary of State for Trade and Industry.The extended reasons for the decision were sent to the parties on 28 September 1995. Mr Rowden served his Notice of Appeal on 9 November. The Appeal Tribunal sent him a notice of hearing of the appeal today. When the matter came on this morning in the list of cases "Not Before 11.30 am" nobody had attended; neither Mr Rowden himself nor a representative. We asked an officer of the Tribunal to make an inquiry on the telephone to find out if Mr Rowden intended to pursue the appeal. He was contacted on the telephone. He said he was unwell, suffering from flu. He did not ask for the case to be adjourned. He accepted that the case could go ahead in his absence.We have therefore considered not only the extended reasons for the decision, but also the grounds of appeal set out in Mr Rowden's Notice of Appeal. We have treated those as the arguments which he would advance if he were here, or if a representative were here on his behalf to argue the appeal.The problem before the Industrial Tribunal at Exeter is all too familiar: a company, under the control of one person, becomes insolvent and the question arises whether the director and shareholder of the company, who had control over it, is entitled to claim, as an employee, redundancy payments from the Secretary of State.The Secretary of State rejected the application for payments. Mr Rowden therefore took out an Originating Application in July 1995, claiming against the Secretary of State on the Insolvency of his employer, Newpoint (Exmouth) Ltd in compulsory liquidation. He was the Managing Director and Company Secretary. He had staff and factory control. He was responsible for setting up and supervising contracts. He became redundant on 17 March 1995. He claimed that he should have a payment from the Secretary of State, as an employee of that company.The Redundancy Payment Service of the Department of Trade and Industry wrote a letter dated 21 August 1995, admitting that Newpoint (Exmouth) Ltd was insolvent within the meaning of Sections 106 and 127 of the Employment Protection (Consolidation) Act 1978 , but not admitting that Mr Rowden was an employee of the company. He was put to proof of that.The Tribunal in Exeter heard the case on written representations from the Secretary of State and Mr Townend of the Citizens Advice Bureau represented Mr Rowden. The Tribunal correctly identified the issue for their decision, as whether Mr Rowden was an employee. This was a matter on which they were unfortunately in disagreement.The facts which gave rise to the disagreement were these. In 1971 Mr Rowden purchased Newpoint (Exmouth) Ltd on a 50/50 shareholding basis with Mr John Derrick. In 1973 he bought out Mr Derrick and became the sole shareholder, save for one share nominally held by his daughter in order to comply with the requirements of company law. He and his brother, as trustee for his daughter, were directors of the company.An oral agreement was reached between Mr Rowden and Mr Derrick in 1971. There were no specific provisions relating to such matters as salary, hours of work and other employment particulars. The reality was that Mr Rowden did the work on a daily basis. He turned up at the works, opened them up, allocated work to the workmen when they arrived, checked stocks and materials, dealt with customers and suppliers and at the end of the day locked the works up. He did that Monday to Friday on the same regular hours for about 20 years until the company went into compulsory liquidation in 1995. By way of remuneration he drew cash from the company as and when required, normally on a monthly basis. The amount he drew was variable, but was always paid subject to deduction for tax under schedule E and national insurance contributions. The amount he drew annually varied from year to year.On those findings of fact the majority took the view that Mr Rowden was engaged in a business on his own account and was not an employee of the company. He was not subject to any control by any other person. What he did was on his own account, without reference to any instructions or supervision from any other party. There was no evidence or other factor which would normally be found in a contract of employment. There was a total absence of any fixed salary arrangements, such as would be expected for an employee. He was not an employee. The minority member disagreed. He thought it was not appropriate in the circumstances to attach any importance to the lack of control. Reference should be made to the oral agreement made 20 years previously in 1971 with Mr Derrick. That was clear evidence that there was a service agreement.Mr Rowden appealed against that decision. His arguments against the majority view are these. First:
"(a) Only one member of the Tribunal took sufficient account of the fact that it is possible to be the sole director of a company and yet still be an employee and entitled to a redundancy payment. ... Lee v Lee's Air Farming Ltd . ..."
Secondly,
"(b) Because of this failure properly to interpret the law, the majority of the Tribunal erred in maintaining that he could not be considered an employee as he was not subject to proper `control and guidance'. In the circumstances that would be an unrealistic expectation. Para 8 of the Tribunal's decision is relevant with the clear recognition of the existence of a service agreement, albeit an implied one."
Thirdly,
"(c) No consideration was given to the House of Lords decision in the case of Paramount Airlines."
We have considered those arguments. They do not assist Mr Rowden for these reasons.First, the decision whether a person is or is not an employee of the company is essentially a question of fact. There is no appeal against that. Among the most important facts was the finding that, by virtue of owning all but one of the shares in the company, Mr Rowden controlled the company. That is not a normal feature of an employer/employment relationship. It is the employer who controls the employee, not the employee who controls the employer. The Tribunal were, on that finding of fact alone, entitled to come to the conclusion that he was not an employee of the insolvent company.Secondly, he is right in saying, as he does in paragraph 1 of his Notice of Appeal, that it is possible to be a sole director of a company, yet still be an employee. The crucial point is not that he was sole director; it is that he was a 99% shareholder and, as such a shareholder, he had the power of life and death over the company. He could determine who was employed. As regards his own work, he could determine what work he did, where, pay, terms as to holidays and so on. This is another instance of the relationship of majority shareholder in a company being inconsistent with employer/employee relationship. As to the question of an implied agreement, that was not a serious consideration. The service agreement relied upon by the minority member pre-dated the acquisition by Mr Rowden of the majority of the shares. The service agreement in 1971 was made at a time when there was a 50/50 shareholding arrangement between him and Mr Derrick. There was an important change in 1973 when Mr Rowden became the majority shareholder.As to his third point that no consideration was given to the case of Paramount Airlines , there is nothing in that case relevant to the decision in the present case which, as already mentioned, is essentially one of fact; was he an employee or not? The majority were entitled to come to the view that he was not, on the basis of the facts found by them.There is no arguable error of law in the decision. The appeal is dismissed.