MHC CONSULTING SERVICES LTD v MR C TANSELL & OTHERS [1999] UKEAT 1373_98_1409

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [1999] UKEAT 1373_98_1409

Case No Appeal No. EAT/1373/98

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

MHC CONSULTING SERVICES LTDAPPELLANT

MR C TANSELL & OTHERSRESPONDENT

Before

Mr Justice Morison

Date 14 September 1999

[1]APPEARANCES For the Appellants MR J CAVANAGH (of Counsel) Instructed By: Ms J Pennycook Messrs Ellis Jones Solicitors Sandbourne House 302 Charminster Road Bournemouth Dorset BH8 9RU For the First Respondents For the Respondent to Cross-Appeal MR B LANGSTAFF QC Instructed By: Bela Gor The Disability Law Service Part 2nd Floor North High Holborn House 52-54 High Holborn London WC1V 6RL MR J CAVANAGH (of Counsel) Instructed By: Ms A Spence Solicitor Abbey Life Assurance Co Ltd Abbey Life Centre 100 Holdenhurst Road Bournemouth BH8 8AL MR JUSTICE MORISON (PRESIDENT) : The facts giving rise to the appeals in this case may be shortly stated. Mr Tansell, the First Respondent, was employed by a company called Intelligents Limited. Through this company the employee offered his computer skills and services to third parties. MHC Consulting Services Ltd are an Employment Agency specialising in placing computer personnel with third parties. In order to procure the engagement of his computer skills the Applicant had placed his name with a number of such agencies. Abbey Life Assurance Co Ltd ('Abbey Life') entered into a contract with MHC whereby MHC undertook to supply computer personnel to them. Accordingly, MHC entered into a contract with Intelligents whereby Intelligents agreed to supply the Applicant's services to Abbey Life. The Employment Tribunal found:

"The contracts had the effect of putting the applicant (Mr Tansell) under the control of Abbey Life as part of a team investigating the impact of the so called 'millennium bug' within Abbey Life's computer systems. Although the applicant was required to comply with Abbey Life's work rules fees were paid to MHC who in turn paid Intelligents Ltd. The applicant was paid a salary by Intelligents Ltd but funds were also retained within the company."

[2]The Employment Tribunal concluded that Intelligents was not a sham company but formed under advice before the Applicant embarked on selling his computer knowledge and skills through agencies. The Applicant was not employed by either of the Respondents. The nearest relationship that could be construed as an employment relationship was that with Abbey Life. They concluded that the Applicant was not a contract worker for Abbey Life within the definition of section 12 of the Disability Discrimination Act. The section, in the Tribunal's view, clearly sees a direct contractual relationship between the 'employer' and the 'principal' and no such direct relationship existed in the present case and nor could it be artificially created by ignoring the existence of the Applicant's own company. But the Tribunal concluded that the Applicant was a contract worker for MHC. In reaching their conclusion they said this, applying section 12:

" 'principal' means a person ('A') [MHC] who makes work available for doing by individuals [the Applicant] who are employed by another person [Intelligents Ltd] who supplies them under a contract made with A [the principal]. "

[3]They rejected the submission that MHC fell outside section 12 because they did not receive the benefit of any work. The Tribunal concluded that MHC has made work available, albeit through its contract with Abbey Life. It followed, from the Tribunal's conclusions, that the Applicant being a contract worker of MHC, was entitled to proceed in his action under the Disability Discrimination Act 1995 against them, whereas the application against Abbey Life was dismissed.

[4]The appeal in this case was brought by MHC. When the appeal was made, Mr Tansell cross-appealed in relation to the Tribunal's conclusion that he had no claim against Abbey Life. That cross-appeal was lodged outside the 42 day period. The time was extended in the exercise of our discretion. The MHC appeal was lodged on the last day available for lodging a Notice of Appeal. Mr Tansell's cross-appeal was lodged very promptly thereafter and, it seems to us, that the justice of the case requires time to be extended for Mr Tansell's cross-appeal to be heard and determined. Mr Cavanagh has, in the event, appeared on behalf of both MHC and Abbey Life and has therefore advanced the appeal and resisted the cross-appeal respectively.

[5]It is accepted by the Employment Appeal Tribunal, as was submitted by both parties in this case, that the issue before the court is of importance and of potentially wide application. The determination of the issue depends upon a proper construction of section 12 of the Disability Discrimination Act 1995. There are similar, but not identical, provisions in relation to the Race Relations Act and the Sex Discrimination Act. The section in question is not, we think, drafted with the clarity that one would wish.

[6]We are told that in the computer industry persons such as Mr Tansell are normally required to offer their services through their own limited liability company because of the risks that they will incur if they were to make a negligent mistake in the course of carrying out their duties. The consequences of such a mistake could be enormous and sufficient to cause the individual to become bankrupt. In this case MHC did not require Mr Tansell to undertake that process. He had already incorporated a company prior to his contact with MHC. Quite apart from the computer industry, there may well be other examples of cases where an individual wishes to assert that he is a contract worker of an organisation but whose claim fails, if the Tribunal were right in this case, simply because there was one too many contracts in the chain.

[7]Under the Act it is unlawful for an employer to discriminate against a disabled person in the arrangements he makes for deciding to whom to offer employment. It is also unlawful for an employer to discriminate against one of his employees. Section 68(1) of the Act defines employment to mean:

"… subject to any prescribed provision, employment under a contract of service or of apprenticeship or a contract personally to do any work and related expressions are to be construed accordingly."

[8]It is of the essence, therefore, of an employment relationship covered by the Act that there should be a contractual relationship between the employer and the employee subject to any other provision of the legislation. In this case there was a contract of employment between Intelligents and Mr Tansell, and a contract between Intelligents and MHC and a contract between MHC and Abbey Life. Although there were obviously Abbey Life rules which would apply to anybody working in their premises, it seems to us to be stretching reality too far to suggest that thereby there was some kind of implied contract between Mr Tansell and Abbey Life whereby Mr Tansell undertook personally to do work for Abbey Life. Thus, as the Tribunal held and we agree, Mr Tansell was not employed by Abbey Life in the conventional sense. Section 12 of the Disability Discrimination Act 1995 provides as follows:

"(1) It is unlawful for a principal, in relation to contract work, to discriminate against a disabled person – … (b) by not allowing him to do it or continue to do it; … (6) In this section – 'principal' means a person ('A') who makes work available for doing by individuals who are employed by another person who supplies them under a contract made with A; 'contract work' means work so made available; and 'contract worker' means any individual who is supplied to the principal under such a contract."

[9]The untried allegation made in this case is that Abbey Life rejected Mr Tansell's services because of his disability. Accordingly MHC withdrew him from the site. From the point of view of a fair examination of the merits of the case it is clear that, if the law permits, Abbey Life should be the target about whom complaint is made in this case. In any proceedings against MHC, they will simply justify what they did by reference to the instructions which were given to them by Abbey Life.

[10]It is difficult to see in what circumstances the Applicant would have a realistic prospect of success in proceedings against MHC, which are the only proceedings which the Employment Tribunal have permitted him to assert. If, and we stress the word if, Abbey Life have discriminated against Mr Tansell because of his disability then in practical terms it would be desirable that they should be called to account before an Employment Tribunal.

[11]On behalf of MHC and Abbey Life, Mr Cavanagh submitted that it would strain the meaning of section 12 to conclude that MHC were a principal within the meaning of subsection 6. He points out that the structure of section 12 is to make what he calls the "end user" the principal. The entity which was making work available for doing by individuals was Abbey Life and not MHC. But Abbey Life could not be the principal because, in accordance with section 12(6) there must be a contractual relationship between the middle man and the applicant. The person who employs the worker must be the person who has a contract with the end user. The section contemplates a contract between the employer and the principal. One cannot pretend that Intelligents did not exist. Abbey Life could not be the principal because MHC was not Mr Tansell's employer.

[12]In a most persuasive submission Mr Langstaff QC submitted that the consequences of Mr Cavanagh's submissions would be to make it easy to evade the wide coverage which the Act was designed to achieve. It would, as he submitted, be all too simple to insert another contractor somewhere along the line. And he gave as examples arrangements between employers in the building trade and one man contracting companies. He submitted that on the statutory language it was possible to treat Mr Tansell as a contract worker of Abbey Life which would give effect to the intention of Parliament.

[13]The first submission relied on section 12(3) which provides:

"(3) The provisions of this Part (other than subsections (1) to (3) of section 4) apply to any principal, in relation to contract work, as if he were, or would be, the employer of the contract worker and as if any contract worker supplied to do work for him were an employee of his."

Applying this subsection Mr Langstaff submitted that MHC would be the principal and under subsection 6 Abbey Life would also be a principal. In other words, where there is a chain of contracts there is some kind of iterative process. MHC would be treated under subsection 3 as the employer of Mr Tansell. MHC makes his services available to Abbey Life who are the principal under subsection 6, and who make work available for doing by Mr Tansell (who is employed by MHC, who have supplied him under a contract made with Abbey Life).

[14]The alternative way in which he put the point was this. He says that the words "who supplies them under a contract made with A" are apt to include a direct or an indirect supply. On this basis Abbey Life made work available for doing by individuals (including the Applicant) who are employed by another person (Intelligents Ltd) who supply persons such as the Applicant under a contract eventually made with Abbey Life. In other words he submitted that the supply may be made by virtue not only of a contract between Abbey Life and MHC but by virtue of a chain of contracts made with other agencies or individuals. The question of supply is a question of fact. If the arrangements amounted to such a supply, and provided that Mr Tansell was supplied under a contract with Abbey Life, who made work available for doing by him and he was employed by another person, then the definition of principal was satisfied. In short, the first argument presented accepts that the person who supplies the individuals should be their employer whereas the second argument does not so require.

[15]It was accepted by both Counsel that there is no decision relating to a series of contracts which is binding on this court. The point has never been considered by the Court of Appeal. It has been considered by the Employment Appeal Tribunal in a case called Dr Lloyd v IBM (UK) Ltd

EAT/642/94

. This is not a reported decision but nonetheless deserves respect. The Employment Appeal Tribunal concluded that the supply of the contract worker to the principal must be pursuant to an obligation between the supplier and the principal and reliance was placed on a case called Rice v Fon-a-Car

[1980] ICR 133

. With great respect to our colleagues, the reference to Rice v Fon-a-Car does not assist in the determination of the issue which was then before the court.

[16]It seems to us that Mr Cavanagh was right to point out that the normal case which section 12 is designed to cover is where a person, such as a temp, is on the books of a temping agency and is found a job at X, but X refuses to allow that person to work for them for unlawful reasons [sex, race or disability]. Unless the temp had a right to bring a complaint against X the right not to be discriminated against would be worthless.

[17]There are many features of an employment relationship between X and the person supplied. The person would be working alongside staff employed by X, working the hours laid down by X and subject to the normal day to day management control imposed by X. The person would only be permitted to work for X so long as X was amenable. If X did not want the person, X would have the right to say so, precisely as though X were the employer who decided to terminate a normal employment relationship. But we are not prepared to hold that the relationship between Mr Tansell and Abbey Life has become one of employer and employee. The fact that he may have looked like an employee in the respects indicated does not compel the conclusion that he was employed. It would be quite artificial, as it seems to us, to spell out some kind of implied contract between Abbey Life and Mr Tansell, having regard to the express contracts which were in existence. MHC were providing Mr Tansell's services to Abbey Life and Abbey Life were accepting them under that contract.

[18]Conversely, we accept Mr Cavanagh's submission that to hold MHC to be the principal would give Mr Tansell no effective remedy. It is Abbey Life who should have to answer for any discriminatory acts done by them, rather than giving Mr Tansell what might appear to be a mere technical claim against MHC.

[19]Thus, as it seems to us, either section 12 does not apply because Intelligents employed Mr Tansell, and Mr Tansell is effectively left without remedy, or section 12 can accommodate a string of contracts in either of the two ways suggested by Mr Langstaff QC in argument.

[20]Mr Langstaff's first argument says that Mr Tansell is, by virtue of section 12(3), to be treated as employed by MHC. The words "The provisions of this Part" are apt to include the provisions of section 12, which are part of "this Part". In this way Abbey Life make work available for doing by individuals such as Mr Tansell who are employed [deemed to be employed] by MHC who supplies them under a contract between MHC and Abbey Life. It is of interest to note that there is no equivalent of section 12(3) in the other two Discrimination Acts. Thus, if this argument were correct, there would be a more extended definition of a contract worker in this Act than in the other two. Whilst we see the force of this submission, it seems to us unlikely that Parliament intended section 12(3) to have the effect contended for. We consider that Parliament would have expressly referred to "this section" had it been intended to apply the subsection when interpreting subsection (6).

[21]Mr Langstaff's second argument is, we think, more attractive, despite the previous decision of the EAT in Lloyd v IBM (UK) Ltd . Mr Tansell was employed by another person, namely Intelligents. Intelligents supplied his services, ultimately, to Abbey Life through MHC under a contract between MHC and Abbey Life. Therefore, whenever there is an unbroken chain of contracts between the individual and the end-user, the end-user is, by definition, the "principal". It seems to us that this construction of section 12(6) gives effect to the general principle which applies in social legislation of this kind, namely that the statute should be construed purposively, and with a bias towards conferring statutory protection rather than excluding it. Such a construction does not strain the language of section 12(6). It seems to us a possible construction which we are prepared to adopt. It follows that we differ from the earlier decision. It may well be that the EAT did not have the advantage of having before them the two submissions so persuasively presented to us by Mr Langstaff.

[22]We are, therefore, of the view that Mr Tansell can sue Abbey Life. We would reverse the decision of the tribunal and allow the claim to proceed against Abbey Life rather than against MHC, who are not, on the basis on which we have decided the appeal, a principal, because they were not, what Mr Cavanagh aptly said in argument 'the end-user'.

[23]This is an important matter, of direct relevance to the computer industry and of wider importance. Both parties would have asked for leave to appeal. This is a case where leave should be granted. The EAT and Employment Tribunals will welcome such guidance as the Court of Appeal see fit to give on this issue.