Tice & Anor v Cartwright [1999] UKEAT 728_98_0101

EAT
Tice & Anor v Cartwright
[1999] UKEAT 728_98_0101 · 1999-01-01
HIS HONOUR JUDGE C SMITH QC This is an appeal by the first Respondents before the Industrial Tribunal, namely Mr G M Tice and Mr M J Tice against the decision of an Industrial Tribunal held at Southampton on 3 February 1998, the Chairman sitting alone, of which the extended reasons were sent to the parties were sent to the parties on 17 February 1998 whereby the Industrial Tribunal held that the Applicants' employment by the second Respondents and then by the first Respondents had been continuous for a period of not less than two years, so that the Industrial Tribunal had jurisdiction to hear the Applicants' claim for unfair dismissal. The second Respondents were a company called Tice & Son Limited.The Chairman held that the first Respondents, the partnership, which was a partnership comprising two partners, namely Mr G M Tice and Mr M J Tice, had indirect control of the second Respondents Tice & Son Limited so that the two employers were associated employers within the meaning of Section 231(a) of the Employment Rights Act 1996, with a result that the Applicants' period of employment with the second Respondents counted as a period of employment with the first Respondents within Section 218(6) of the 1996 Act.We say straight away that the appeal raises a difficult question of law in our judgment, which we have not found easy to resolve and we have been greatly helped by the submissions made to us by Counsel on each side. We return to the Chairman's decision.The Chairman made important findings of fact in paragraph 9 of his decision. That paragraph, should this matter go further, should be incorporated into this judgment.
"9. Tice & Son Ltd was incorporated in 1961. The First Respondents, Mr G M Tice and Mr M J Tice, are brothers and have an equal shareholding in that company. They also trade in partnership as the Spur End Service Station. They are equal partners. Each of the brothers owns a 50% shareholding in the Second Respondents, of which they are both Directors, and a 50% share in the partnership. Together they control the company and together they control the partnership. Their ownership is in the same proportions in each case."
These findings of fact, as contained in paragraph 9, are not in dispute. The Chairman correctly stated the issue for his decision at paragraph 13 of the decision and made further important findings of fact at paragraph 14. At paragraphs 15 and 16, the Chairman referred to two cases, there set out which we will refer to further below, which he purported to distinguish for the reasons he gave in paragraph 17. Those cases in fact concerned the other limb of Section 231, namely Section 231(b), namely whether there existed two companies of which a third person, directly or indirectly, had control, whereas the Chairman held that the question that he had to answer in the present case was whether the two brothers acting in the partnership had control of the second Respondent company, namely the question posed in Section 231(a) of the 1996 Act.For the reasons he set out in paragraph 17-19 of the decision, he held that the partnership, through the two brothers, had indirect control of the company the second Respondents. For so long as the brothers acted in concert together, between them they had the voting strength to control the company.In a powerful submission to us, Counsel for the Appellants submitted first of all that the question posed by both limbs of Section 231 of the 1996 Act, namely Section 231(a) and Section 231(b) both depended for their resolution on the proper legal meaning given to the words "direct or indirect control" and the expression "has control" must be given the same meaning in each limb. We agree that the expression "has control" must be given the same meaning in both limbs of the Section.Counsel for the Appellants next submitted that it is clear from the EAT decisions of Hair Colour Consultants Limited v Meara 1984 ICR 677 and Secretary of State v Newbold 1981 IRLR 305, both decisions of the EAT, that "control" in Section 231 means voting control i.e. control by a majority of votes and does not extend to a 50% shareholding. Accordingly, he submitted further that this overriding legal principle did not permit of any exception even by way of de facto plural control, so that he submitted that we should not follow the approach taken to a situation of plural control by the EAT in Zarb and Samuels v British and Brazilian Produce Company Sales Limited 1978 IRLR 78 where the EAT held that, at least in a situation of potential plural control by a group or by more than one individual, the expression "has control" was dealing essentially with practical rather than theoretical matters so that the Industrial Tribunal could and should look at all the circumstances as to the way in which control has in fact been exercised by the group in order to answer the question who has control.Counsel for the Appellants submitted to us that despite the strong approval of the approach in Zarb given by the Employment Appeal Tribunal in Harford v Swiftrim Limited 1987 ICR 439 we should adopt the approach in the Hair Colour Consultants case, especially because of the doubt cast upon Zarb obiter by Lord Justice Mustill (as he then was) in the Court of Appeal in the case of S W Launderettes v Laidler 1983 ICR 455 , particularly between page 459(e) and 460(c) of the learned Lord Justice's judgment. Counsel also relied upon the decision of the Court of Appeal in Payne v Secretary of State for Employment [1989] IRLR 353. Accordingly, Counsel for the Appellants submitted that since neither of the Tice brothers in the partnership comprising the first Respondents had more than a 50% shareholding in the company Tice & Son Limited. The partnership legally could not have control of the Company, either directly or indirectly within the meaning of Section 231(a) or (b) of the 1996 Act, in the light of those authorities. In the alternative, he submitted that if it was legitimate to enquire into the question of whether at the material time the two brothers were acting in concert, so as between them to have control over the second Respondent company, then the Industrial Tribunal failed to make any adequate finding of facts so the appeal should be allowed and the case should be remitted for such enquiry to be made on that subsidiary and alternative basis.Against those submissions, Counsel for the Respondents submitted that the approach in Zarb remained the correct approach, at least in circumstances where there was a group or plural control, which we should follow. He submitted that that approach was consistent with a purposive interpretation of Section 231 where Parliament clearly intended that where one employer in fact controlled another employer which was a limited company, then employees of both should be entitled to continuity of employment and protected accordingly. He submitted that Zarb had never been overruled by the Court of Appeal and that it had been consistently followed by the EAT as pointed out by Mr Justice Popplewell in Harford . He submitted that Industrial Tribunals were well used to deciding such questions as to where actual control lay and he submitted that, with great respect, the difficulties adverted to by Lord Justice Mustill in the South West Launderettes case might be the exception rather than the rule for the reasons pointed out by Mr Justice Popplewell in Harford . He submitted additionally that, properly construed, the Chairman's decision did infer from the fact that the two brothers each owned 50% of both the partnership and the company that the two brothers did in fact control the second Respondents and he submitted that the Chairman was entitled so to infer and so to conclude in the absence of evidence from the employers to the contrary.Those in outline were the submissions placed before us in this difficult case. Had we thought that there was clear Court of Appeal authority on the point we have to decide we would of course have followed it without hesitation. However in our judgment, it is the case that the approach in Zarb has not been overruled by the Court of Appeal and we take the view on what we found a difficult matter that it is still open to us to decide which approach the Employment Appeal Tribunal should follow on the present state of the authorities on our understanding of them.We have carefully considered the submissions made to us. We have concluded that we should prefer the approach, at least in the very particular factual circumstances of the present case, of the Employment Appeal Tribunal in the Zarb case, namely that the word "control" in Section 231 of the Employment Rights Act is dealing with practical rather than theoretical matters. No doubt the question of voting control is central in the context of company law. However, we consider that in the employment protection field, it is legitimate to give the words a purposive interpretation consistent with the intention of Parliament as described by Mr Justice Popplewell in the Harford case.In reaching this conclusion, we have carefully taken into account the criticisms by Lord Justice Mustill, but we believe that we find comfort from the approach taken to such criticism by the Employment Appeal Tribunal in Harford based on substantial experience of both the judges and the members of the Employment Appeal Tribunal there referred to, upon which we cannot improve. In the special circumstances of this case where only the same two persons owned both the partnership and the company we cannot envisage such difficulties arising.We note further that Zarb appears to have been specifically approved in the Newbold case in circumstances where there is a question of joint control of more than one person (see particularly paragraphs 13 and 14 of the judgment at page 306 of the decision). We also derive support from the reasoning of the EAT in Poparm Ltd v Weekes (1984) IRLR 388 particularly at paragraph 18 of the judgment. Accordingly, we consider it appropriate in the circumstances, of this particular case to follow the approach laid down by the Employment Appeal Tribunal in Zarb and approved in Harford . We note that in the case of Payne , the Court of Appeal left open the question as to whether there may be unusual circumstances where de facto control might on occasion be the relevant test.Accordingly, we find that the Chairman was right in holding that the partnership had control of the company so that they were associated employers. In reaching this conclusion, we further adopt the reasoning of the EAT in the Zarb case with regard to the burden of proof, as dealt with at paragraph 12 of the judgment in the Zarb case, as again approved by the EAT in Harford . We hold that by the opening words of paragraph 18 of the Chairman's decision, he made it clear that he was inferring from the existence of the common shareholdings that the partnership controlled the company. In our judgment, in the absence of evidence to the contrary, that was a conclusion of fact he was entitled to reach.On the facts in this case, it appears to us unanimously that the evidence that the two brothers in partnership in fact controlled the second Respondent company in which they shared a 50% shareholding at the relevant time i.e. at the time when the Applicant entered into the partnership's employment, was on the face of it cogent in the extreme and there was no evidence presented by the employers to the contrary. Accordingly, having decided that the correct legal test is that of de facto control, at least in the particular circumstances of this case, we consider that the appeal stands to be dismissed.