CABLE AND WIRELESS PLC v MR P MUSCAT [2005] UKEAT 0661_04_2502

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2005] UKEAT 0661_04_2502

Case No Appeal No. UKEAT/0661/04

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

CABLE AND WIRELESS PLCAPPELLANT

MR P MUSCATRESPONDENT

Before

His Honour Judge D Serota

Date 25 February 2005

[1]APPEARANCES For the Appellant MS ANYA PALMER (Of Counsel) Instructed by: Messrs Charles Russell Solicitors 8-10 New Fetter Lane London EC4A 1RS For the Respondent MR O MALIK (Of Counsel) Instructed by: Messrs Steele Raymond Solicitors Richmond Point 43 Richmond Hill Bournemouth BH2 6LR SUMMARY Employment Tribunals and the Employment Appeal Tribunal are bound by the Decision of the Court of Appeal in Dacas v Brook Street Bureau

[2004] IRLR 358

and that Decision was not decided per incuriam . HIS HONOUR JUDGE D SEROTA QC Introduction In this case we have decided that Employment Tribunals and the Employment Appeal Tribunal are bound by the Decision of the Court of Appeal in Dacas v Brook Street Bureau

[2004] IRLR 358

and that Decision was not decided per incuriam .

[2]This is an appeal by the Respondent from a Decision of the Employment Tribunal at London Central (T Ryan Esq, Chairman) and entered on to the Register on 19 August. The Employment Tribunal held that the Claimant employee had been an employee of the Respondent for over twelve months before presenting his Originating Application so that his application was presented in time. There is what appears to be a long delay between the hearing, which concluded on 8 December 2003, and the promulgation by the Employment Tribunal of its Extended Reasons. The explanation is that the case of Dacas v Brook Street Bureau , a Decision of the EAT, was under appeal to the Court of Appeal. The parties agreed to adjourn the hearing before the Employment Tribunal until the Court of Appeal judgment was handed down. The judgment was handed down on 5 March 2004. The parties thereafter supplied further written submissions to the Employment Tribunal.

[3]We propose to deal with the matter in this way. Firstly, we shall set out briefly the facts as found by the Employment Tribunal. Secondly, we shall set out those terms of the relevant contracts that are germane to this appeal. Thirdly, we shall out the reasoning of the Employment Tribunal. Fourthly, we shall consider the judgment of the Court of Appeal in Dacas and other Authorities. Fifthly, we will then consider the submissions made to us and sixthly, and finally, we shall set out our conclusions. Relevant Facts as found by the Employment Tribunal

[4]The Employment Tribunal set out its findings of fact fully and we propose only to set out those that are necessary to explain our reasoning. Mr Muscat, the Claimant was employed by a company known as Exodus Internet Limited ("EIL") as a Telecommunications Specialist. In March 2001 EIL took over a company known as Global Centre Limited and the Claimant was appointed Senior Telecommunications Manager with a salary of £50,000 per annum together with a car allowance of £6,000 per annum. He worked 37½ hours per week without overtime but was entitled to time off in lieu when he worked outside ordinary working hours. Mr Muscat's conditions as we have outlined them continued at all relevant times, whether he was working with EIL or the Respondent.

[5]On 21 September 2001 EIL wrote to the Claimant and other staff in relation to possible redundancies. On 2 October 2001 EIL, acting by a Director Darcy Harrison wrote again to the Claimant to tell him that there was a potential buy-out of EIL. In order to facilitate the buy-out EIL needed to reduce its "headcount". There would be some redundancies and other employees would have to become "designated contractors". If the Claimant wished to continue working he would have to become a designated contractor. The Claimant was advised by Mr Harrison and another Director of EIL, Mr Tate, that he would need to set up a limited company for invoicing purposes. It is clear that as from October 2001, although EIL regarded him as a contractor, the Employment Tribunal found that as a matter of law he remained an employee of EIL. There is no appeal against this part of the Decision.

[6]On 15 October 2001 Mr Muscat was informed that he was redundant and given a payment in lieu of notice together with a contractual, as opposed to a statutory payment, which were described by EIL as being ex gratia . However, he continued to work as before save that his pay was increased to £69,000 per annum to allow for the fact that he now paid national insurance contributions himself and was responsible for his own income tax. The Employment Tribunal found as a fact that he was in receipt of the same emoluments before becoming a contractor as well as after. Payments were not made to him directly but were made to the Service Company which was incorporated on 17 October 2001 at the expense of EIL. That company was known as E-Nuff Communications Limited. We shall refer to it as "E-Nuff". The company was incorporated by one Chris Field, an accountant recommended to the Claimant by EIL. Mr Field assisted the Claimant and advised him that he should pay himself a salary with tax to be paid under Schedule E.

[7]Mr Muscat submitted a draft agreement to Mr Harrison entitled "Independent Contractor Agreement". We shall refer later to the terms of this agreement so far as they are relevant. There was no written agreement between E-Nuff and EIL. Mr Harrison and Mr Muscat agreed the terms of this agreement and they became the terms as between E-Nuff and EIL as well, as if the name of E-Nuff was substituted for that of Mr Muscat in the document.

[8]Towards the end of 2001 EIL became a target of the Respondent. The Respondent eventually took over EIL. In December 2001, after the first two months period provided for in the Independent Contractor Agreement, Mr Harrison told the Claimant that his terms and conditions would apply as before. He would receive regular monthly contracts and be entitled to one month's notice from EIL before the contract was to be terminated but otherwise the contract would remain open ended. Mr Muscat continued to do the same work after 15 October 2001 as before and submitted invoices claiming sums for his services. The business of EIL was taken over by the Respondent on 19 February 2002. After this, the amount of work and tasks he undertook at the Respondent's offices increased and those he had carried out at sites of EIL and Global Centre diminished. These sites were eventually closed down and retained staff were sent to work elsewhere for the Respondent at a site which came within Mr Muscat's remit. The Employment Tribunal found, and this finding is not subject to appeal, that Mr Muscat's employment transferred from EIL to Cable and Wireless by virtue of a transfer under the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE").

[9]The take-over appears to have been completed on 24 April 2002. At the time Mr Muscat was told by Cable and Wireless that he would have to provide his services through an agency as Cable & Wireless would not pay him or his service company E-Nuff directly. Accordingly, the following documentation came into existence or became relevant to these proceedings:(a) A Contract dated 26 July 2001 entitled "Agreement for Provision of Contract and Permanent Personnel" was entered into between Abraxas PLC and Cable & Wireless. We shall return later to the terms of this agreement, which provided in effect that Abraxas should provide contract personnel for Cable & Wireless. The subsequent agreement between E-Nuff and Abraxas was entered into pursuant to this agreement.

(b) On 13 August 2002 E-Nuff entered into an agreement with Abraxas entitled "Contract for Services". The agreement was signed on behalf of E-Nuff by Mr Muscat. We shall refer to the terms later. We understand that the agreement was back-dated to April 2002. E-Nuff agreed to provide Mr Muscat's services to Abraxas' client Cable and Wireless for the period 26 April 2002 – 31 August 2002. The contract envisaged the possibility of some substitute carrying out Mr Muscat's work subject to consent of Abraxas and Cable and Wireless. He continued working as before under the direction of Cable & Wireless managers, initially a Mr Jones and later a Mr Steel. Cable and Wireless continued to supply Mr Muscat with a mobile telephone and a laptop computer and paid his mobile telephone bills as before. Mr Muscat arranged his annual leave to suit Cable & Wireless. Within Cable and Wireless' department structure Mr Muscat was labelled as an employee with an employee number and was included in the headcount of Mr Jones' team. All equipment he used was paid for by Cable & Wireless. His only contact with Abraxas was in relation to the payment of invoices. At no time did he [or E-Nuff] seek to provide a substitute.

[10]It is important, in our opinion to repeat that there is no appeal against the finding of the Employment Tribunal that when Cable and Wireless took over the business of EIL, Mr Muscat's employment transferred to Cable and Wireless by TUPE Transfer. The case for Cable and Wireless is that the agreements entered into in July 2001 and August 2002 were crucial, and the agreement of August 2002 removed Mr Muscat as an employee of Cable and Wireless and returned him to a status of being employed by neither Abraxas nor Cable and Wireless.

[11]In November 2002 Mr Steel asked the Claimant if he would consider a permanent position with Cable and Wireless and was told that his contracts would continue until March 2003. However, on 27 November 2002 he was told he would be laid off as a worker from 29 November and on 31 December 2002 his contract was terminated.

[12]Before leaving the factual background we would observe that there were advantages to Cable and Wireless in having an arrangement whereby its contractors were not to be constituted as employees. This would not only keep down the headcount but would provide greater flexibility to Cable and Wireless because contractors would not have anything like the same employment rights as employees. There were some advantages so far as contractors were concerned. They might have the benefit of being able to set off expenses, such as the running of a car, against their tax liability and possibly benefit from more favourable opportunities to make pension provision. Arguably it may be said that the contractors had the benefit of a reasonably well paid post which might not have been available to contractors who insisted on being true employees. This, however, is far from clear. The major disadvantage so far as concerned Mr Muscat and other contractors, was of course that there would be no job security and only the most limited employment rights. If this appeal is successful it would be clear that Mr Muscat would have no right to claim unfair dismissal or a redundancy payment.

[13]Although this point was not the subject of submissions either to the Employment Tribunal or us it seems fair to assume that so far as concerned these contractors and Cable and Wireless, the advantage in their relative negotiating positions was very much in favour of Cable and Wireless. That is, of course, an assumption on our part, but it may have some relevance in understanding the background to these proceedings. We stress that this assumption does not affect our decision in any way. Terms of the relevant contracts.

[14]We now turn to deal with the relevant terms of the contracts we have mentioned. We start with the Independent Contractor Agreement, which dates from about October 2001. As we noted the agreement we have seen refers to the 'contractor' as Mr Muscat. As we have already noted it was agreed between Mr Muscat and EIL that it should be regarded as constituting the terms of the agreement between E-Nuff and EIL. The preamble describes the agreement as consisting of the Business Terms, Standard Conditions, and any attachments thereto between EIL and the contractor. There is a description of services:

"Attendance at [EIL] premises for a period of two months, commencing October 16 th 2001, to provide Telecommunications systems support to [EIL], and to complete the tasks outlined in Appendix A."

The agreement sets out the payments that EIL should make and provides that invoices were to be submitted by the contractor. The standard conditions contain the following:

"2. Independent Contractor Status. It is the express intent of the parties that Contractor is an independent contractor and not an agent, joint venturer or partner of Exodus. Nothing in this Agreement shall be interpreted or construed as creating or establishing the relationship of employer and employee between Exodus and any employee or agent of Contractor. Contractor will perform the Services as defined in the Statement of Work and related Purchase Orders under the general direction of Exodus, but Contractor will determine, in Contractor's sole discretion, the manner and means by which the Services are accomplished. Contractor shall retain the right to perform services for others during the term of this Agreement. 5. Payment for Services. In consideration for the timely and fully satisfactory performance of the Services, Exodus agrees to pay Contractor the Contract Sum specified in the Statement of Work and/or related Purchase Orders in the manner specified in the Statement of Work. Any Milestone Payments specified in the Statement of Work shall be credited against and deducted from the Contract Sum. 9. Obligations of Contractor c. Contractor may not assign, delegate or subcontract neither this Agreement nor any of its rights, duties or obligations under this Agreement without the express written consent of Exodus. Any purported assignment or delegation in violation of this provision shall be void at the option of Exodus. Contractor's obligations are personal to Contractor, and Contractor acknowledges that Exodus has entered into this Agreement in reliance on Contractor's ability and agreement to perform its obligations accurately, competently and completely. Exodus reserves the right to assign its rights and obligations hereunder, as it deems appropriate. 21 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the rendering of the Services. Except for any misrepresentation or breach of warranty which constitutes fraud: a. the agreement supersedes and extinguishes any and all prior negotiations, representations and agreements, whether written or oral, between parties with respect to the rendering of such Services; b. each party acknowledges to the other that it has not been induced to enter into any such documents by nor relied upon any representation or warranty other than the representations and/or warranties contained therein; c. each party hereby irrevocably and unconditionally waives any right it may have to claim damages or to rescind this Agreement by reason of any misrepresentation and/or warranty not set forth in any such Agreement."

The Appendix sets out various tasks to be completed and a value is placed against each task.

[15]We now turn to the Contract of Services dated 9 August 2002 entered into between Abraxas and E-Nuff and set out the relevant provisions. "1. DEFINITIONS In this Contract for Services, the following definitions apply:

"Company" means Abraxas plc (and its successors) whose registered office is 47 Eastcastle Street London W1W 8DY. "

Client" means the person firm or corporate body requiring the Company to perform Assignments. "Consultancy" means the corporate body assigned or engaged by the Company (and) save where otherwise indicated includes any officer employee sub-contractor or representative thereof. "Works Schedule" means an outline of the project, tasks or services to be performed. "Assignment" means the period during which the Consultancy is engaged to undertake Works Schedules. "Documents" means Certificate of Incorporation, or Certificate of Incorporation on Change of Name Details of Shareholders and Directors, Certificate of Registration for Value Added Tax, Insurance Policies Work Permits, Certification for Residency purposes where work is carried out. References to the singular include the plural and references to the masculine include the feminine and vice versa. THE CONTRACT a) This Contract for Services together with the Works Schedule and any attachments shall constitute the entire Contract between the Company and the Consultancy and shall govern the Assignment undertaken by the Consultancy. No verbal or other written contract shall be valid. b) No variation or alteration to this Contract for Services shall be valid unless approved by a Director or Manager of the Company in writing. c) The relationship between the parties to this Contract is one of independent Suppliers and nothing contained in .this agreement shall be construed as constituting or establishing any partnership or joint venture or relationship of employee and employer between the parties. Upon completion of a Works Schedule, there is no obligation by the Company or the Client to provide future assignments to the Consultancy, neither is there an obligation for the Consultancy to provide future services to the Company or the Client. 3. ASSIGNMENTS The Company acknowledges that the Assignment will be undertaken by one or more individuals provided by the Consultancy and nominated in the Works Schedule. The Consultancy may Change or replace such individuals provided the Company and the Company's client are satisfied that the proposed replacement possesses the necessary skills and expertise to carry out the Assignment. Furthermore the Consultancy warrants that any individual provided during the Assignment does have the necessary qualifications and is suitable for the Assignment. a) The Consultancy undertakes at its own cost to provide all training necessary for any individual assigned to the Company to enable the Works Schedule to be undertaken in the manner expected of an independent professional. b) Upon the acceptance by the Consultancy of an offer of an Assignment the Company shall supply the Consultancy with a Works Schedule specifying the scopes of Works, the expected duration of the Assignment the fees payable and any other relevant terms. In the event of a contradiction as between this Contract for Services and the Works Schedule the Works Schedule shall apply. 4. FEES AND PROGRESS REPORTS a) The Consultancy shall submit an invoice for the fees due(such fees to include VAT where appropriate) calculated by applying the rates set out in the Works Schedule to the Assignment progress reports. d) The Company reserves the right to delay or withhold payment of invoice in the event that: i) The Consultancy has not returned the Works Schedule and the Contract for Services duly signed. ii) The Assignment progress reports are improperly completed or unauthorised. iii) The Consultancy fails to submit the assignment progress report promptly, in accordance with 4b)iii). iv) The Client notifies the Company that it has a request for correction o rectification of works previously certified, in which case the Company reserves the right to withhold payment until it is notified that the correction or rectification has been completed. v) If after reasonable request has been made by the Company the Consultancy has not provided in respect of any individuals engaged on the Assignment adequate evidence that the Consultancy is fully complying with taxation social security immigration employment or insurance matters in the countries in which the Assignment is being carried out. e) Expenses incurred in the performance of the Assignment are to be invoiced separately and supported by a detailed claim sheet and copies of VAT receipts and signed by an authorised signatory of the Client. 6. LIABILITY a) The Consultancy shall indemnify and keep the Company indemnified from and against any loss and liability that the Company may suffer or incur as a result of: i) any negligent, deliberate act or omission of the Consultancy; or ii) any accident, damage or any injury to the Consultancy or any third party in connection with the Agreement The Consultancy shall, both during the Assignment and thereafter, maintain and keep in place suitable insurance policies to cover any claims and liabilities arising, including those arising out of paragraph 6(a), above. 7. CONSULTANCY'S OBLIGATIONS At all times the obligations of the Consultancy and any individual engaged on the Assignment shall include but not be limited to: a) To be conversant with and adheres to the terms and conditions of the Contract b) Carry out the services to the best of its ability and with due care and attention and within the agreed timescales. c) To take into account the directions of the Client during the course of exercising professional skills and utilising specialist knowledge. 8 RELATIONSHIP BETWEEN THE COMPANY AND CONSULTANCY The Consultancy acknowledges to the Company that its services are supplied to the Company as an independent contractor and that accordingly the responsibility of complying with all statutory and legal requirements relating to the individuals engaged on the Assignment (including the payment of taxation) is the sole responsibility of the Consultancy. In the event that any person should seek to establish any liability or obligation upon the Company on the grounds that any individual engaged on the Assignment is an employee of the Company, the Consultancy shall upon demand indemnify the Company and keep it indemnified in respect of any such liability or obligation and any related costs, expenses or other losses, which the Company shall incur."

[16]At the end of the Agreement is a Works Schedule which identifies the Consultancy as being E-Nuff and the Client as Cable and Wireless. The nature of the services to be provided by E-Nuff are defined (Telecoms Engineer) and the period of the assignment is said to be from 26 April 2002 to 31 August 2002 and the fee rate is a "professional daily rate of £265.40".. On expiry of this Contract for Services, subsequent Contracts for Services were agreed in identical terms covering the periods September 2002, October 2002, and November-December 2002; each such contract had attached a new Works Schedule.

[17]We now turn to the Agreement for the provision of contract and permanent Personnel made between Abraxas and Cable & Wireless dated 26 July 2001. The agreement is made between Abraxas defined as "The Agency" and Cable & Wireless and provides:

"The Agency has agreed to provide to Cable & Wireless certain contract personnel … upon the terms and conditions of this Agreement."

[18]By Paragraph 3 of the Agreement Abraxas agreed, subject to the terms of the Agreement, to provide Agency Contractor Services to Cable & Wireless. The Agreement provided that Cable & Wireless should provide purchase orders to Abraxas and that Abraxas should supply contractors with the necessary competence, qualifications and expertise who would:

"5.1 (c) Perform the Contractor Services with reasonable care and skill; (d) Obey and act in accordance with all lawful and reasonable directions of Cable & Wireless;"

[19]By Clause 6 Cable & Wireless undertook to afford contractors access to the site where they were to work together with appropriate working space and facilities, materials and equipment:

"6.3 Cable & Wireless acknowledges that the Agency and the Contractor shall determine the manner in which the Contractor Services are provided in a manner which is consistent with this Agreement and in accordance with the instructions of Cable & Wireless. Cable & Wireless shall notify the Agency promptly if the Contractor's performance of the Contractor Services is unsatisfactory at any time. For the avoidance of doubt, Cable & Wireless shall not be responsible for handling any disciplinary or grievance hearings brought by the Contractor, and any arrangements for absence from work should be notified by the Contractor to the Agency."

[20]Paragraph 12 deals with the term and termination of contracts, replacement of contractors and entitles Cable & Wireless to bar renewal of any contract and to terminate any contract:

"12.3 Any Contract may be terminated forthwith by Cable & Wireless upon giving written notice to the Agency, where the Contractor under such Contract: (a) is guilty of serious or persistent misconduct in connection with the performance of the Services under the relevant Contract; or (c) is unable by reason of illness or other incapacity to perform the Services under the relevant Contract for an aggregate period exceeding 30 days, in any one consecutive period of 12 months; 12.4 Any Contract may be terminated by Cable & Wireless upon giving to the Agency: (a) at least 5 days notice where the Contractor under the Contract has worked under such Contract for a period of less than 4 consecutive weeks; (b) at least 2 weeks notice where the Contractor under the Contract has worked under such Contract for a period of at least 4 but less than 8 consecutive weeks; (c) at least 4 weeks notice where the Contractor under the Contract has worked under such Contract for a period of 8 consecutive weeks or more."

[21]Cable & Wireless is also entitled by virtue of Clause 12.5, if dissatisfied with the provision of Contractor Services by any Contractor, to require Abraxas to procure that such Contractor immediately ceases to provide such services.

[22]Paragraph 15 provides as follows:

"15 RELATIONSHIP BETWEEN CABLE & WIRELESS AND THE CONTRACTORS The Agency acknowledges to Cable & Wireless that the services of each Contractor are supplied to Cable & Wireless as an independent contractor and that the Contractor shall not be viewed as an employee of Cable & Wireless. The Agency and Cable & Wireless agree that nothing in this Agreement requires that the Contractor is an employee of the Agency. However it is agreed that if the Contractor is, in law, viewed as an employee for whatever reason, the responsibility of complying with all statutory and legal requirements relating to the Contractor as an employee (including the payment of any taxation) shall be discharged wholly by the Agency. In the event that any person (including the Contractor) should seek to establish any liability (including but not limited to liability for any tort committed by a Contractor) or obligation upon Cable & Wireless upon grounds that a Contractor is an employee of Cable & Wireless, the Agency shall indemnify and keep Cable & Wireless indemnified against all losses, liabilities, costs and expenses (including but not limited to legal costs) arising from or incurred in relation to such alleged liability or obligation, except to the extent that such liability or obligation arises as a direct result of an instruction or an unlawful act or omission by Cable & Wireless, or as a result of legislative or common law changes outside the control of the Agency. The Agency shall notify Cable & Wireless forthwith if it has reason to believe that any such claim may arise, whether or not as a result of an instruction or an unlawful act or omission by Cable & Wireless."

[23]The Agreement contains an entire Agreement Clause at Paragraph 34. The Decision of the Employment Tribunal

[24]In order to understand the decision of the Employment Tribunal it is necessary to briefly explain the facts of Dacas v Brook Street Bureau (supra). Mrs Dacas was a cleaner who was registered with the Respondent Brook Street Bureau under a "temporary worker agreement" the terms of which made clear that there was no contract of employment between her and Brook Street Bureau or between her and Brook Street Bureau's "client", in this case the London Borough of Wandsworth ("Wandsworth"). Brook Street had a contract with Wandsworth whereby they agreed to provide staff for Wandsworth at various establishments including a mental health hostel at West Drive, Streatham which provided long term care for persons with mental health problems. The Contract was entered into as a result of competitive tendering. Wandsworth would be invoiced by Brook Street from timesheets prepared by the staff supplied. Wandsworth would then make a payment to Brook Street which would make payments to the staff concerned having deducted PAYE and NIC. All equipment was supplied by Wandsworth which exercised control over Mrs Dacas where she worked. She worked for a set time. After an argument between her and a visitor to the hostel, Wandsworth asked that she be withdrawn. Brook Street told Mrs Dacas they would not find her further work. She brought proceedings for unfair dismissal against both Brook Street and Wandswoth. The Employment Tribunal found she was not an employee of either so her claim was dismissed. She appealed to the EAT presided over by The President, Burton J. The EAT held that the Employment Tribunal was wrong and that it should have held that Mrs Dacas was employed by Brook Street Bureau. Brook Street appealed to the Court of Appeal. There was no appeal by Mrs Dacas against the finding that she had not been employed by Wandsworth. It is pertinent to note that the terms of the Agreement between Mrs Dacas and Brook Street included provisions by Clause 1.1(b) "For the avoidance of doubt the provisions contained in this Section shall not give rise to a contract of employment between Brook Street and the temporary worker, or the temporary worker and the client." The temporary worker was Mrs Dacas and the client was Wandsworth.

[25]The Employment Tribunal set out the facts we have referred to and found as we have already said that Mr Muscat was an employee of EIL and subsequently, by virtue of TUPE transfer, of Cable & Wireless.

[26]The Employment Tribunal then set out the relevant terms of the Agreements and record how the case was adjourned after evidence and submissions pending the decision of the Court of Appeal in Dacas , after which it received further written submissions.

[27]The Employment Tribunal noted that the employment arrangements in the present case differed from the triangular position in Dacas because of the presence of E-Nuff. The Employment Tribunal, therefore, sought to analyse the position without "the effect of E-Nuff being taken into account" – see Paragraph 14(5). The Tribunal decided that were it:

"… to conclude that the Applicant did not have an implied contract of service with the Respondent independently of the existence of E-Nuff then factoring E-Nuff into the then triangular equation could not assist the Applicant in establishing such an implied contract of Service. If, on the other hand, the Tribunal were satisfied that apart from the position of E-Nuff there was an implied contract of service between the Applicant and Respondent, we would then go on to consider whether the presence of E-Nuff in the arrangement affected that and if so, in what way."

[28]The Employment Tribunal then considered a submission by Ms Palmer, who appeared on behalf of Cable & Wireless at the Employment Tribunal as she has appeared in front of us, in relation to the effect of the decision in Stevedoring and Haulage Services v Fuller

[2001] IRLR 627

, a decision of the Court of Appeal to which we shall refer later. Ms Palmer relied upon this decision before the Employment Tribunal as before us, as authority for the proposition that it is not possible to imply a contract where to do so would be inconsistent with the express terms of relevant contracts. This decision was not before the Court of Appeal in Dacas and Ms Palmer argued it is inconsistent with Dacas . The Employment Tribunal rejected this submission firstly because the express conditions relied upon by Ms Palmer were not conditions contained in a contract between Mr Muscat and E-Nuff but in a contract between E-Nuff and Abraxas. The second reason for rejecting that submission given by the Tribunal was that the contract under consideration in Stevedoring and Haulage Services Ltd v Fuller

[2001] IRLR 267

CA was that of an 'Overarching contract' whereby a series of dockworkers worked on a series of casual ad hoc days over a period of years. The Employment Tribunal considered that the analysis of the Court of Appeal in that case did not stand up to "the scrutiny of the Court of Appeal in Dacas v Brook Street Bureau ." The Employment Tribunal concluded that it was likely:

"that in its comprehensive review of the authorities carried out by the members of the Court of Appeal in Dacas if it had been thought that that case provided assistance one way or the other concerning the particular arrangement with which Dacas was concerned it is implausible that it would not have considered and dealt with that authority. In any event, Ms Palmer's submissions seek to sidestep the essence of the point made by the majority of the Court of Appeal that it is necessary for a Tribunal in circumstances such as this to consider the position apart from the express contractual term (sic) that exist in the arrangement."

The Employment Tribunal then found that excluding the position of E-Nuff, it was satisfied that there was an implied contract between Cable & Wireless and Mr Muscat, firstly because Cable & Wireless had inherited the contract of employment between EIL and Mr Muscat, and secondly, because the interposition of the Agreement with Abraxas had not destroyed the implied Contract:

"If the Applicant had entered into an agreement with Abraxas at the outset of his work for EIL and that had continued through until his work was terminated at the end of 2002 the indicia and the irreducible minimum and mutuality of obligation which existed from the Applicant and EIL and then the Respondent would not be altered to any extent. In the Tribunal's judgment the mutuality of obligations required by Carmichael v National Power were present. The Applicant, on the facts that we have found, was under the control of the Respondent, and before it EIL, and the money that was paid to Abraxas by the Respondent and by Abraxas on to E-Nuff was for the work performed by Mr Muscat."

The Tribunal at Paragraph 14(12) went on to find that the fact that this was a quadrangular rather than triangular series of contracts made no difference and Mr Muscat was at all material times the employee of Cable & Wireless.

[29]We note that there was no suggestion made to the Tribunal that the contracts between E-Nuff and Abraxas and between Abraxas and Cable & Wireless were shams. Dacas v Brook Street

[30]We now turn to consider the decision in Dacas v Brook Street . The importance of the case to our decision is such that we consider that case in some detail.

[31]We have already set out the relevant facts in Dacas . That case involved what might be regarded as the typical triangular relationship between the Applicant Worker, the Employment Agency and the 'End User', the client of the Agency, who, for commercial if not legal purposes, was the employer in fact. We shall adopt this terminology. There were written agreements between the Worker and the Agency and between the Agency and End User but no express contract between the Worker and the End User. It is necessary to refer to the decision in some detail because it formed the essential part of the reasoning of the Employment Tribunal in this case, and prima facie it would seem we are bound by it unless Ms Palmer can succeed in her submission that it was decided per incuriam or can sensibly be distinguished.

[32]The leading judgement was given by Mummery LJ. He noted the recent growth in the number of agency workers. He said at paragraph 2 that "Some may be surprised to learn that a significant number of people in the labour market, who cannot be accurately described as casual, intermittent or temporary workers, who reasonably think that they are in stable employment relationships and whom reasonable people would regard as employees, may not be employees after all and will be denied the protection of such basic employment rights…."

[33]He mentioned the disadvantages that flow from their not being regarded as employees both in relation to their lack of employment rights and also to the possibility that in actions for tort the 'end user' might not be vicariously liable for their actions; (this was a point made vigorously by Sedley LJ at paragraph 72). He then referred to the fact that Parliament had left it to the Courts to determine on a case by case approach what constituted a contract of service for the purposes of S.230(2) of the Employment Rights Act 1996 'the ERA'. Mummery LJ at paragraph 7 set out the Court of Appeal's approach to the case in a passage that has an important bearing on submissions that it was decided per incuriam. The position was so unclear that:

"it is becoming clear that, in the interests of consistency and predictability, employment tribunals require as much guidance as can be usefully derived from the relevant legal principles and from the current state of the authorities. Although, as I shall explain later, this case is complicated by the circumstances in which the appeal has come before this court, its facts neatly pose a troublesome question of employment law concerning the status of a cleaner who obtained, through an employment agency, four years of regular paid work with one end-user. This court would be failing in its function if it did not address that wider question. One of the reasons for spending a long time on this judgment is that the wider question is now the most intractable, as well as the most basic, in the whole of employment law. On the one hand, it would be more consistent with a purposive construction of the 1996 Act to hold that workers in the position of Mrs Dacas are entitled to protection from unfair dismissal than to hold that they are not. On the other hand, it has to be recognised that that result runs counter to the views and assumptions shared by many, both professional and lay, involved in setting up, operating and using employment agencies."

[34]Having noted the rapid increase in the flexibility and diversity of complex legal and economic relationships he went on to say at paragraph 8:

"The development of 'complex employment relationships', which flourish on the theoretical freedom of the people in the labour market to make contracts of their choice, has added to the difficulty of deciding whether an individual, doing paid work for another, does so under a contract of service and, if so, for whom. The common law notion of a 'contract of service' has to be applied by the courts, in the employment rights context, to constantly changing conditions in and outside the workplace. The general principles of the law of contract are sufficiently flexible to cope with many changes; but sometimes only legislation can supply the solution that the common law is unable to deliver. For example, the working conditions of 'temporary agency workers' have prompted proposals for an EC Directive establishing a protective framework for temporary workers and providing a consistent and flexible framework conducive to the activities of temporary employment agencies, which post temporary workers employed by them to user undertakings to work temporarily under the latter's supervision."

[35]It may fairly be said that the majority judgement in Dacas reflects the Court of Appeal's concern that Parliament has for many years failed to legislate comprehensively, leaving the law in an unsatisfactory state of uncertainty. It may fairly be said also that the majority of the Court of Appeal took the opportunity to bring workers such as Mrs Dacas within the scope of the protection of employment rights afforded by the ERA. This submission is based on the following passage in which Mummery LJ formulated the question to be determined as: "The specific legal question in this case is whether the applicant works under a contract of service (express or implied) when(a) the applicant has entered into a written agreement, expressed to be a contract for services and not a contract of service, with an employment agency; and

(b) the employment agency has entered into an express contract with its client (ie the end-user of work done by the applicant) for the provision of 'agency staff', including the applicant; but

(c) no formal contract of any kind has ever been expressly entered into between the applicant and the end-user, in whose premises the applicant works regularly, exclusively and for reward until dismissal takes place on the initiative of the end-user." (paragraph 11)

[36]The factual basis explored in detail later in the judgement was that: "…. the first impression gained, on looking at the practical realities of the triangular arrangement, is that the applicant is more likely to be regarded as an employee of the end-user than as an employee of the employment agency or as not being an employee at all. There is no dispute in cases like the present that the applicant has done work for the end-user at the end-user's premises and under the control of the end-user, who has indirectly paid the applicant for the work by means of regular payments to the employment agency calculated according to time sheets recording the number of hours worked for the end-user." (paragraph 13)

[37]Mummery LJ then went on to explore the possibility of an implied contract of service between the Worker and the End User at paragraphs 16 to 19:

"16 Implied contract of service The statutory definition of a contract of employment as a 'contract of service' expressly includes an 'implied' contract. This should not be overlooked. I think that it has been. Like other simple contracts, a contract of service does not have to be in any particular form. Depending on the evidence in the case, a contract of service may be implied – that is, deduced – as a necessary inference from the conduct of the parties and from the circumstances surrounding the parties and the work done. As already indicated, the overall situation under consideration is shaped by the triangular format used for the organisation of the work: the applicant, the employment agency and the end-user are all involved. Each participant in the triangular situation may have an express contract with either one of, or with each of, the other two parties. 17 The critical point is that, although the construction of the contractual documents is important, it is not necessarily determinative of the contract of service questions, as contractual documents do not always cover all the contractual territory or exhaust all the contractual possibilities. In determining the true nature of the relationship (if any) between each of the respective parties, it is necessary to consider the total situation occupied by the parties. The totality of the triangular arrangements may lead to the necessary inference of a contract between such parties, when they have not actually entered into an express contract, either written or oral, with one another. Although there was no express contract between the applicant and the end-user in this case, that absence does not preclude the implication of a contract between them. That depends on the evidence, which includes, but may not be confined to, the contractual documents. 18 As a matter of law, when an issue is raised about the status of the applicant in unfair dismissal proceedings, an implied contract between parties who have no express contract with one another is a possibility that should be considered by the employment tribunal in making its findings of fact. It is relevant to the decision whether the applicant works under a contract, and, if so, what kind of contract it is and with whom it was made. There may be no contract of any kind, because it is found that there is no mutuality of obligations. There may be an implied contract, which may be characterised as a contract of service or as a contract for services. There may be an implied contract of some as yet unclassified kind, wedged within the traditional dichotomy, such as a 'semi-dependent worker's contract', as mentioned by Professor Freedland in his book, or a quasi-dependent worker's contract, as mentioned in the work of Professors Deakin and Morris on Labour Law (2001) at p.168. 19 If the applicant has a contract of service in a triangular situation of this kind, it may be with (a) the end-user, the contract usually being an implied one, or (b) the employment agency, depending on the construction of the express contract between the applicant and the agency and on other admissible evidence or, though this is more problematical, (c) more than one entity exercising the functions of an employer, namely the employment agency and the end-user jointly (see Freedland at pp.42–43)."

[38]Mummery LJ considered at paragraph 49 that there was:

"……an 'irreducible minimum of mutual obligation necessary for a contract of service', ie an obligation to provide work and an obligation to perform it, coupled with the presence of control: see, for example, Carmichael v National Power plc at pp.45 (per Lord Irvine of Lairg) and 47 (Lord Hoffmann); Montgomery v Johnson Underwood at paragraphs 21, 23, 46 and 47 and the other authorities cited in the judgments in those cases.' He also noted that: "

A tribunal must, however, resist the temptation to conclude that an individual is an employee simply because he is not a self employed person carrying on a business of his own: Wickens v Champion Employment

[1984] ICR 365

at 371 and Ironmonger v Movefield Ltd

1988 IRLR 461

at paragraphs 19–21."

[39]He went on at paragraphs 50 to identify the issue an Employment Tribunal had to determine in cases of triangular employment relationships: "The real problem for the tribunals is the application of the basic legal requirements to the case where an employment agency is interposed between the applicant and the end-user and where the functions normally found in a single employing entity are redistributed between two entities, each of which denies that it is the employer. Thus, while the end-user is the real and immediate recipient of the work done by the applicant, the employment agency is made responsible for paying remuneration to the applicant and for arranging other benefits usually associated with employment, such as sick leave and holiday pay. If there were no interposed employment agency there would be no doubt that, even in the absence of an express contract, Mrs Dacas worked under a contract of service with the council: it was managing and controlling work done by her in the mutual expectation that she would be paid for what she was told to do and had in fact done. So what difference does the presence of the employment agency really make to the status of Mrs Dacas? Does it mean that, although working under the daily control of the council, she was an employee of Brook Street, who supplied her services to the council? Or does it mean that she was not an employee of anyone? '

[40]He was at pains to point out at paragraph 51 that there was nothing unlawful in what Brook Street and Wandsworth sought to achieve but that they ran the risk of the Courts interpreting the overall legal effect of the transactions taken together in a way contrary to their expectations and desires: "… they must be prepared, if and when the matter is contested, to meet the challenge of general interpretative principles that the legal nature and effect of connected or associated transactions and the documents evidencing them are not ascertained by considering them in isolation from each other or by divorcing them from their context. It is legitimate to have regard to the fact, if it be the case, that a series or number of transactions are intended to operate in combination with one another or are ingredients of a wider transaction intended as a whole. 52 This means that, in ascertaining the overall legal effect of the triangular arrangements on the status of Mrs Dacas, the employment tribunal should not focus so intently on the express terms of the written contracts entered into by Brook Street with Mrs Dacas and the council that it is deflected from considering finding facts relevant to a possible implied contract of service between Mrs Dacas and the council in respect of the work actually done by her exclusively for the council at its premises and under its control, until it took the initiative in terminating that arrangement. The formal written contracts between Mrs Dacas and Brook Street and between Brook Street and the council relating to the work to be done by her for the council may not tell the whole of the story about the legal relationships affecting the work situation. They do not, as a matter of law, necessarily preclude the implication of a contract of service between Mrs Dacas and the council. There may be evidence of a pattern of regular mutual contact of a transactional character between Mrs Dacas and the council, from which a contract of service may be implied by the tribunal. I see no insuperable objection in law to a combination of transactions in the triangular arrangements, embracing an express contract for services between Mrs Dacas and Brook Street, an express contract between Brook Street and the council and an implied contract of service between Mrs Dacas and the council, with Brook Street acting in certain agreed respects as an agent for Mrs Dacas and as an agent for the council under the terms of the express written agreements. 53 I approach the question posed by this kind of case on the basis that the outcome, which would accord with practical reality and common sense, would be that, if it is legally and factually permissible to do so, the applicant has a contract, which is not a contract of service, with the employment agency, and that the applicant works under an implied contract, which is a contract of service, with the end-user and is therefore an employee of the end-user with a right not to be unfairly dismissed. The objective fact and degree of control over the work done by Mrs Dacas at West Drive over the years is crucial. The council in fact exercised the relevant control over her work and over her. As for mutuality of obligation,(a) the council was under an obligation to pay for the work that she did for it and she received payment in respect of such work from Brook Street, and

(b) Mrs Dacas, while at West Drive, was under an obligation to do what she was told and to attend punctually at stated times. As for dismissal, it was the council which was entitled to take and in fact took the initiative in bringing to an end work done by her at West Drive. But for the council's action she would have continued to work there as previously. It is true that the obligations and the power to dismiss were not contained in an express contract between Mrs Dacas and the council. The fact that the obligations were contained in express contracts made between Mrs Dacas and Brook Street and between Brook Street and the council does not prevent them from being read across the triangular arrangements into an implied contract and taking effect as implied mutual obligations as between Mrs Dacas and the council.

[41]Mummery LJ considered a number of authorities, but not authorities relating to implication of contractual terms that might be contrary to express terms of the contract such as Stevedoring and Haulage Services v Fuller

[2001] IRLR 627

. Neither did he refer to authorities such as The Aramis 1989 Lloyds LR 213 and Baird Textiles Holdings Limited v Marks & Spencer plc

[2001] EWCA 274

which provide authority for the proposition that a contract can only be implied in cases of necessity. He was at pains to point out that the arrangements between the three parties were not a sham, but that the parties would have realised that the triangular arrangements were not 'normal' for a contract of service; Brook Street was acting as 'an independent party' in incurring certain obligations and was not simply acting as agent finding work for Mrs Dacas or finding workers for Wandsworth. It was also probably correct to say insofar as concerned the subjective intentions of the parties, that there was no intention on the part of the council or on the part of Brook Street that the council should enter into a direct contractual relationship with Mrs Dacas. However at paragraph 61 he continued:

"I am not, however, persuaded without the benefit of relevant findings of fact made by an employment tribunal which has addressed the question of implied contract, that no contract of service can be implied between Mrs Dacas and the council because such a contract is 'simply not compatible with the documents' or because the fact of control by the council is wholly explicable by virtue of the contractual obligation that exists between Mrs Dacas and Brook Street. Before reaching a conclusion on those points, I would like to know what in fact went on between the council and Mrs Dacas during the years when she was working at West Drive. What is lacking in this case is any finding by the employment tribunal about the facts of the daily contact between Mrs Dacas and the council at West Drive and the nature and extent of the dealings between them. This information is lacking because the employment tribunal did not address the possibility of an implied contract, which it should have addressed and should have been asked to address."

[42]Having regard to the tenor of his judgement and the relatively limited nature of the information he would have requested the Employment Tribunal to find, there can be little doubt that the majority of the Court of Appeal expected the Employment Tribunal could only have come to one conclusion; that Mrs Dacas had an implied contract of service with Wandsworth. We note that Mummery LJ had already found that Wandsworth in fact exercised the relevant control over her work and over her; it was under an obligation to pay for the work that she did for it; although she received payment in respect of such work from Brook Street. While working at the Hostel Mrs Dacas was obliged to do what she was told and to attend punctually at stated times. Furthermore it was Wandsworth which was entitled to and did bring her work at the Hostel to an end and but for that action she would still have been working there. Sedley LJ would go on to say (at paragraph 70) that:

"…… her working terms and conditions, so far as they were in evidence, were indistinguishable from those of any local authority employee: she was expected to work as directed by Wandsworth's managerial staff, and she was finally dismissed for allegedly failing to do so."

[43]We should also note that Mummery LJ distinguished Carmichael v National Power

2000 IRLR 43

because (paragraph 62) it:

"…. was not an employment agency case and did not deal with the question of an implied contract of service. The reasoning of the speeches is important, however, on two points of principle: first, on the point that, if mutuality of obligation is lacking, as it was held to be in a casual, 'as required' arrangement, there could be no contract of service; and, secondly, even where there are documents evidencing the arrangements between the parties, if the documents were not intended to constitute an exclusive record of the agreement, the employment tribunal are entitled, in deciding whether there was a contract of service, to make inferences from what the parties said and did both at the time when the applicant was engaged and subsequently."

[44]The Court of Appeal unanimously allowed the appeal by Brook Street on what might be described as the conventional grounds of lack of mutuality and control over Mrs Dacas' working as well as the terms of the contract between them. Mummery LJ concluded that (paragraph 68) "…..in future cases of this kind the employment tribunal should, in my judgment, at least consider the possibility of an implied contract of service. The result of the consideration will depend on the evidence in the case about the relationship between the applicant and the end-user and how that fits into the other triangular arrangements. In general, it would be surprising if, in a case like this, the end-user did not have powers of control or direction over such a person in such a working environment. The end-user is the ultimate paymaster. The arrangements were set up and operated on the basis that the end-user was paying the agency. What was the council paying for, if not for the work done by Mrs Dacas under its direction and for its benefit?"

[45]Sedley LJ was even more emphatic than Mummery LJ that the proper construction of the facts found by the Employment Tribunal was that Mrs Dacas was an employee of Wandsworth. He considered that the conclusion of the Employment Tribunal that Mrs Dacas was employed by nobody was 'simply not credible' and that 'there has to be something wrong with it.' (paragraph 71). He considered that in an action against Wandsworth as being vicariously liable for a tort committed by Mrs Dacas:

"…it is a near-certainty that the county court or the High Court would find Wandsworth vicariously liable for Mrs Dacas' negligence. Counsel advancing a submission (and it is the submission made to us) that Mrs Dacas had for four years or more been cleaning the hostel as a contractual licensee, or pursuant to some other innominate type of contract, and that Wandsworth therefore had no vicarious liability for her negligence, could look forward to a bad day in court."

[46]Sedley LJ considered that the correct approach was not to dissect the relationship between Mrs Dacas and Wandsworth but rather to ask whether 'the elements considered as a whole and in context spell out a relationship of employer and employee' (paragraph 74.) It is helpful to set out a rather longer passage from his judgement starting at paragraph 75:

"The argument for Wandsworth proceeds from the fact that it had no written agreement of any kind with Mrs Dacas to the submission that there was accordingly nothing into which any terms could be implied. This, however, misses the critical point that there are more means of expressing mutual intentions than putting them in writing. In the field of employment it is not uncommon to find that a contract of employment has come into being through the conduct of the parties without a word being put in writing or even, on occasion, spoken. In particular, conduct which might not have manifested such a mutual intention had it lasted only a brief time may become unequivocal if it is maintained over weeks or months. Once the intention to enter into an employment relationship is so expressed, the common law will imply a variety of terms into it and simultaneously will spell vicarious liability out of it; and statute will add a series of other rights and obligations. 76 It is correct that the written terms of the temporary worker agreement allowed Brook Street to move Mrs Dacas daily from job to job, or from a job to no job, and to send a different cleaner each day or week to the West Drive hostel. Had this or something like it happened, I accept readily that it would have been difficult, though not necessarily impossible, to spell out of it any contract of employment between Wandsworth and Mrs Dacas. But it is not what happened; it was very possibly something that Wandsworth would not have wanted to happen; and the employment tribunal's task was to make a legally proper appraisal of what did happen. This they failed to do. As Lord Justice Mummery has demonstrated, their single paragraph of findings about Mrs Decas's relationship with Wandsworth fails to identify, much less address, the determinative questions. 77 For my part, I would doubt whether, at least on the facts found by the tribunal, those questions were susceptible of more than one answer – namely that by the date of her dismissal she was an employee of the borough with a statutory right not to be unfairly dismissed. In saying this, I should make it clear that there is nothing special about the length of time for which, as it happens Mrs Dacas had been working for Wandsworth. Until a year had gone by she had no protection in any case against unfair dismissal; but once arrangements like these had been in place for a year or more, I would have thought that the same inexorable inference would have arisen. 78 As Lord Justice Mummery has made clear, nothing we decide at this level can now fix Wandsworth with liability. But my principal reason for agreeing that Brook Street was Mrs Dacas's employer is that, in my judgment, the evidence before the employment tribunal pointed to the conclusion that Wandsworth was. Had Wandsworth remained a party it would have been necessary to remit the claim against it for a correctly approached decision on its liability, not least because the possibility that she had no employer defies common sense."

[47]Munby J dissented from the reasoning of the majority as to implication of a contract of employment in circumstances where the approach of the industry is founded on assumptions including the assumption that (paragraph 82) "if the obligation to remunerate the worker is imposed on one person whilst control of the worker is vested in another, there cannot be a contract of employment with either' . Munby J parted company from the majority because:

"….what is relied on in this type of case as negativing the existence of any contract of service – indeed any contract at all – between the worker and the end-user is not the mere fact that there are contracts both between the worker and the agency and also between the agency and the end-user. What is relied on is the fact that the two critical elements – the obligation to remunerate and the right to control – are located in different parties. It is the differential distribution between the agency and the end-user of rights and obligations that would normally all be vested in the employer which is crucial and which has hitherto been relied on by the industry as necessarily producing the happy outcome – happy, that is, both for the agency and the end-user, though not, of course, for the worker – that the worker has no contract of service either with the agency or with the end user."

Munby J supported his view by reference to authorities including the judgement of Longmore LJ in Montgomery v Johnson Underwood Ltd

[2001] EWCA Civ 318

2001 IRLR 269

at paragraph [46] that:

"Whatever other developments this branch of law may have seen over the years, mutuality of obligation and the requirement of control on the part of the potential employer are the irreducible minimum for the existence of a contract of employment."

At paragraph 89 he said:

"…. the authorities, in my judgment, support the assumptions upon which the industry has hitherto proceeded. If the obligation to remunerate the worker is imposed on the agency, there cannot be a contract of service between the worker and the end-user. And if, at the same time, control is vested in the end-user, then there equally cannot be a contract of service between the worker and the agency."

[48]Munby J considered that the decision of Elias J in the EAT in Stephenson v Delphi Diesel Systems Ltd

[2003] ICR 471

was persuasive authority in support of the proposition that there was no implied contract of employment in such circumstances. The contractual arrangements were similar to those in both Dacas and the present case, in that the Applicant had a contract with an Agency which 'supplied' him to work for the End User by virtue of an agreement between the Agency and the End User. The End User paid the Agency for his services and the Agency made a payment to the Applicant. Elias J had held (accepting the submissions of Gavin Mansfield) that the facts in that case were such that implication of a contract of employment between the Applicant and End User was simply not compatible with the documents, the arrangement between the Agency and the Applicant were not a sham and it was neither necessary nor appropriate to infer that there must have been some other separate, independent contractual obligations between the Worker [a machine operator] and the End-User [the Agency's client].

[49]Elias J did not consider it appropriate to imply any term to explain the fact of control being exercised by the end-user. On the contrary, he accepted that that was wholly explicable by virtue of the contractual obligations that existed between the Worker and the Agency. Mummery LJ was less impressed with Mr Mansfield's submissions than Munby J or the EAT in Dacas presided over by the President, Burton J. Mummery L.J. did however acknowledge that 'the judgment is certainly the most fully reasoned to be found in the authorities on this point.' [paragraph 60]

[50]We set out the conclusions of Munby J at paragraphs 101 to 103 because Ms Palmer submitted that they, rather than the judgements of the majority, correctly stated the appropriate legal principles "Where, with all respect, I part company with my Lords is in relation to three matters. The first is the suggestion that the objective fact and degree of control over the work done by Mrs Dacas over the years is crucial. That, as it seems to me, somewhat overstates the position. And in any event it does not seem to me, with all respect, to meet the point made by Elias J in the Stephenson case." 102 The second is the suggestion that there is mutuality of obligation because the council was under an obligation to pay for the work that Mrs Dacas did for it and she received payment in respect of such work from Brook Street. In this connection my Lord asks rhetorically, What was the council paying for, if not for the work done by Mrs Dacas under its direction and for its benefit? The difficulty with this approach, as Mr Swift correctly pointed out, is that the council had no obligation to pay Mrs Dacas, that Brook Street's obligation to pay her arose independently of whether or not Brook Street was paid by the council, and that the council did not set the rate of her pay. It needs also to be borne in mind that the sum contractually payable by the council to Brook Street was not simply the aggregate of the sums payable by Brook Street to Mrs Dacas and her fellow workers. It will also have included, in addition to Brook Street's profit, an element reflecting the cost to Brook Street of meeting its various obligations to the council. 103 The contract between Brook Street and the council was for the provision of services in accordance with a detailed specification and various other contractual documents. The specification, amongst other things, required Brook Street to ensure that any staff supplied to the council had been formally interviewed, had satisfactory references and, in respect of staff supplied to work directly with children, had been recruited in accordance with the Social Services Department's recruitment procedures, to ensure that its own recruitment staff were trained in the selection of professional staff to work with children or vulnerable adults, and to ensure that all staff were instructed in safe working practices and were made aware of their obligations under the Health and Safety at Work Act 1974. The answer to my Lord's rhetorical question, I respectfully suggest, is that what the council was paying for was not the work done by Mrs Dacas and her fellow workers but the services supplied to it by Brook Street in accordance with the Specification and the other contractual documents. The monies paid by the council to Brook Street were not payments of wages, nor were they calculated by reference to the wages payable by Brook Street to Mrs Dacas and her fellow workers. There was no mutuality. 104 The final matter is the assumption that any very useful purpose is likely to be served by remitting a case such as this for rehearing by the employment tribunal. I rather doubt that it will, for I find it very difficult to imagine that any tribunal correctly directing itself in law could find that there is in these circumstances any contract, let alone a contract of service, between Mrs Dacas and the council. I agree with the submission made on this point by Mr Foy QC. Such a finding is likely to be extremely rare, because there can only be an employment relationship if the end-user is responsible for the payment of remuneration to the worker, and in most cases – of deliberate purpose – it is the agency and not the end-user who undertakes to pay the worker."

[51]We now turn to consider other authorities. We start with the Decision of the House of Lords in Carmichael v National Power

[2000] IRLR 43

. The case concerned the question as to whether the guides at a power station operated by the Respondent were employees who worked under contracts of employment. If they were they would be entitled to written particulars of the terms of their employment under Section 1 of what is now the Employment Rights Act. The crucial findings of fact in that case were that the Respondent was under no obligation to provide the Applicants with work nor were the Applicants obliged to accept work when offered to them by the Respondent. Lord Irving of Lairg LC had this to say (para.18):

"If this appeal turned exclusively – and in my judgment it does not – on the true meaning and effect of the documentation of March 1989, then I would hold as a matter of construction that no obligation on the CEGB to provide casual work, nor on Mrs Leese and Mrs Carmichael to undertake it, was imposed. There would therefore be an absence of that irreducible minimum of mutual obligation necessary to create a contract of service … . 19. In my judgment, it would only be appropriate to determine the issue in these cases solely by reference to the documents in March 1989, if it appeared from their own terms and/or from what the parties said or did then, or subsequently, that they intend then to constitute an exclusive memorial of their relationship. The industrial tribunal must be taken to have decided that they were not so intended but constituted one, albeit important, relevant source of material from which they were entitled to infer the parties' true intention, along with the other objective inferences which could reasonably be drawn from what the parties said and did in March 1989, and subsequently."

Lord Hoffman at para. 29 also gives assistance as to whether written agreements between the parties could be the only material considered by a Court or Tribunal in considering the contractual position between them:

"… I think that the Court of Appeal pushed the rule about the construction of documents too far. It applies in cases in which the parties intend all the terms of their contract (apart from any implied by law) to be contained in a document or documents. On the other hand, it does not apply when the intention of the parties, objectively ascertained, has to be gathered partly from documents but also from oral exchanges and conduct. In the latter case, the terms of the contract are a question of fact. And of course the question of whether the parties intended a document or documents to be the exclusive record or the terms of their agreement is also a question of fact."

[52]This decision is thus the highest authority for two propositions relevant to these proceedings. Firstly, that there cannot be a contract of employment without mutuality of obligation, the irreducible minimum of which is that the employer should provide work and the employee undertake that work. Secondly, that in ascertaining the terms of any contract a Court or Tribunal is not precluded from going outside the terms of written agreements and indeed is bound to do so, unless it is clear that the parties intended all the terms of their contract apart from those implied by law, to be contained in relevant a document or documents.

[53]We have already referred to the case of Stevedoring and Haulage Services v Fuller

[2001] IRLR 627

. The Applicants in that case had been made redundant as permanent dockworkers but were subsequently taken on as casual workers on terms that they would provide their services on an ad hoc and casual basis. There was no obligation on the part of the Respondent to provide work for the casual workers, nor were the casual workers obliged to accept any work so offered. The terms and conditions that they signed included a provision expressly providing that they were not to be employees of the Respondent. They worked for the Respondent on many more days than not and did not work for any other employer. After working on that basis for some three years they applied to an Employment Tribunal for written statements of the particulars of their employment. The Tribunal concluded that they were "employees" and the EAT dismissed the Respondent's appeal. The Court of Appeal (Schiemann, Robert Walker and Tuckey LJJ) made clear that a Court or Tribunal cannot supplement the terms of an Agreement: "…by implying terms so as to water down the effect of the documents containing the express terms and give it sufficient mutuality to pass the test [of mutuality as set out in Carmichael ]. We do not think this approach can be justified. If there was no contract, there was no contract and one could not be created by the implication of terms in this way. 11. If there was a contract, we cannot see any way in which the ET's implied terms could be incorporated into it. The implied terms flatly contradict the express terms contained in the documents: a positive implied obligation to offer and accept a reasonable amount of casual work (whatever that means) cannot be reconciled with express terms that neither party is obliged to offer or accept any casual work. None of the conventional routes for the implication of contractual terms will work. Neither business efficacy nor necessities require the implication of implied terms which are entirely inconsistent with a supposed contract's express terms. '

[54]This is perhaps a recent application to the employment field of a well established principle. One cannot imply terms into a contract, let alone create a contract, if to do so is contrary to express terms agreed between the parties.

[55]We also considered two decisions of the Court of Appeal which provide authority for the proposition that a contract can only be implied in the same circumstances as those in which a term of a contract can be implied, in particular only when implication is "necessary". In The Aramis

[1989] 1 Lloyd's Rep 213

the Court of Appeal considered whether a contract could be implied between the transferee of a bill of lading to whom goods had been delivered, and the carrier. Bingham LJ cited with approval from the judgment of May LJ in The Elli 2

[1985] 1 Lloyds Rep 107

"However, I also agree that no such contract should be implied on the facts of any given case unless it is necessary to do so: necessary, that is to say, in order to give business reality to a transaction and to create enforceable obligations between parties who are dealing with one another in circumstances in which one would expect that business reality and those enforceable obligations to exist."

Bingham LJ continued at page 224:

"I do not think it is enough for the party seeking the implication of a contract to obtain 'it might' as an answer to these questions, for it would, in my view be contrary to principle to countenance the implication of a contract from conduct if the conduct relied upon is no more consistent with an intention to contractthan with an intention not to contract. It must, surely, be necessary to identify conduct referable to the contract contended for or, at the very least, conduct inconsistent with there being no contract made between the parties to the effect contended for. Put another way, I think it must be fatal to the implication of a contract if the parties would or might have acted exactly as they did in the absence of a contract. If this approach is correct, I think it is impossible to imply a contract on the bare facts of this case. Nothing that the shipowners or the bill of lading holders did need have been different had their intention been not to make a contract on the bill of lading terms. Their business relationship was entirely efficacious without the implication of any contract between them. Although the bill of lading holders had no title to any part of the undivided bulk cargo they had a perfectly good right to demand delivery and the shipowners had no right to refuse or to impose conditions."

Bingham LJ went on to recognise the "good sense and commercial convenience" of the decision below that a contract was to be implied. However, commercial convenience and reasonableness do not: "entitle one to cast principle aside and simply opt for a commercially convenient solution." (page 225)

[56]We next refer to the decision of the Court of Appeal in Baird Textile Holdings v Marks & Spencer

[2001] EWCA Civ 274

. The Vice-Chancellor (Sir Andrew Morrit) approved the dictum of Morrison J:

"(1) A court will only imply a contract by reason of the conduct of the parties if it is necessary to do so. It will be fatal to the implication of a contract that the parties would or might have acted as they did without any such contract. In other words, it must be possible to infer a common intention to be bound by a contract which has legal effect. If there were no such intent that the claim would fail."

He cited the passages set out from the Aramis and appears to have accepted the submission that " it would be odd if the principle for the implication of the contract at all should be different or less onerous than the principle for the implication of a term in a contract."

[57]He went on to refer to Wilson v Partenreederei Hannah Blumenthal

[1983] AC 854

. Lord Brandon of Oakbrook considered the question whether a contract to abandon an arbitration might be implied from conduct, or more precisely lack of conduct. He considered that an actual abandonment required proof of conduct of each party as evinced to the other party and acted on by him, as "leads necessarily to the inference of an implied agreement" between them to abandon the contract. Lord Roskill at page 923 had referred to "the only possible inference [being] that the agreement to arbitrate has been rescinded by mutual consent".

[58]It is clear, therefore, that a contract cannot be implied unless it is necessary to do so and only if the acts of the parties are more consistent with an intention to contract rather than with an intention not to contract. If the parties might or would have acted exactly as they did in the absence of a contract it is impossible for a contract to be implied. The submissions

[59]We start with the submissions of Cable & Wireless. It seems to us that there is no escape from the position that for this appeal to succeed Cable & Wireless must somehow get round the decision in Dacas v Brook Street . Ms Palmer has taken two principal points. Firstly, she has mounted a frontal attack on Dacas and has submitted that it was wrongly decided, or alternatively that the decision in so far as it concerned an implied contract was obiter and should not be followed. The Employment Tribunal considered whether it could distinguish the Dacas case on its facts principally because in that case there was a tripartite agreement between the Agency Worker, the End User and Agency. In the present case there is a "quadrangular" arrangement involving Mr Muscat, E-Nuff, Abraxas and Cable & Wireless. Ms Palmer tells us that this point was taken by the Employment Tribunal of its own motion so as to speak.

[60]Ms Palmer made certain factual points she submitted were relevant:(a) Mr Muscat accepted that he had never objected to being a contractor and had never asserted he was an employee. We have approached this appeal on the basis that Mr Muscat at all times was treated as a contractor by Cable & Wireless and never asserted that he was an employee during time he "worked" for them.

(b) Mr Muscat accepted that he had no objection when asked to sign the contract for services with Abraxas.

(d) Mr Muscat accepted that he could not pick and choose which terms in the contract of service he might rely upon.

[61]We shall firstly set out in brief Ms Palmer's submissions that Dacas was wrongly decided or should not have been followed by the Employment Tribunal. Ms Palmer submitted that the Employment Tribunal and the Employment Appeal Tribunal are not bound to follow the Decision of the Court of Appeal if it is decided per incuriam . She asked forensically what a party was to do if there was a " per incuriam decision". Should the party wait until the case reaches the Court of Appeal? She submitted that the desire on social grounds to confer statutory employment protection rights on Agency workers was a matter for Parliament. In the absence of legislation it could not properly be argued that it was "necessary" at common law for a contract to be implied between agency workers and workers so as to give them the statutory protection Parliament has not thought appropriate to confer expressly. She also submitted that the dissenting judgment of Munby J was correct.

[62]Ms Palmer went on to submit that the decision in Dacas in so far as it concerned implication of a contract of employment between an Agency Worker and End User was obiter. In Dacas the point that contract might be implied between Mrs Dacsas and Wandsworth was never taken in the Employment Tribunal. We do not consider it necessary to consider this point further because our reading of the majority judgment, assuming that it was decided correctly, is that a decision that Mrs Dacas may have been employed by Wandsworth was an essential ingredient of the decision.

[63]Ms Palmer relied on the authorities we have set out and which were not considered by the Court of Appeal in Dacas . Stevedoring and Haulage Services v Fuller (supra) is authority for the proposition that a contract cannot be implied if it is inconsistent with an express term to the contrary, is inconsistent with Dacas . Further, the Court of Appeal did not consider the authorities for the proposition that a contract can only be implied in cases of necessity; ( The Aramis and Baird Textiles Holdings Ltd v Marks & Spencer plc ). She submitted that these cases follow conventional contractual principles that apply to all cases and the Employment Tribunal should have had regard to them. The Employment Tribunal ignored the principles set out in those cases.

[64]She submitted that the parties must have the right to contract and change their contractual relationships as they choose. As it is possible, by agreement, for an Agency worker to become a fully fledged employee, so it must be possible for an employee to become an Agency worker.

[65]Ms Palmer criticised the Employment Tribunal for apparently failing to have sufficient regard to the written contracts and failing to ask whether they were intended to represent an exclusive record of the Agreement between the parties. The Employment Tribunal should have concluded by virtue of the provisions we have referred to, in particular in the Agreement between E-Nuff and Abraxas to the effect that there was to be no contract of employment between Mr Muscat or E-Nuff with either Abraxas or Cable & Wireless, that these contracts were intended to be an exclusive record of the Agreement. As a contract could only be implied if necessary, had the Employment Tribunal addressed this point the claimant's claim was bound to fail as there was no necessity.

[66]If there was to be an implied contract, Ms Palmer asked forensically, where was the offer and acceptance? There was no intention on the part of Cable & Wireless to contract with Mr Muscat in the sense of an intent to create the legal relations of a contract of employment. Further, there was no consideration as between Mr Muscat and Cable & Wireless.

[67]We deal with this point in passing because in our opinion if we are bound by Dacas , we must follow it. On that assumption, there clearly is sufficient in the decision of the Employment Tribunal to justify its findings that there has been offer and acceptance, intention to create legal relations and consideration between the parties.

[68]Ms Palmer then submits that nowhere does Mummery LJ say anything about the basis on which it is permissible to find an implied contract. Mummery LJ was willing to find an implied contract simply because it was a desirable outcome. Nowhere does he refer to the correct test, namely that a contract should only be implied where "necessary".

[69]Ms Palmer submitted that the Employment Tribunal was wrong to say that Dacas required consideration of the position apart from express contractual terms. The Employment Tribunal did not say that it was required to look at "both" the contractual terms and the general position. It is possible to read what the Employment Tribunal had to say at Paragraph 14.6 of the Decision in that way. We deal with this point now because it seems clear to us that the Employment Tribunal looked at the reality of the situation as advised by the majority in Dacas . It did not ignore, in our opinion the decision in Carmichael which required it to look at both written agreements and the surrounding country, so as to speak. We are satisfied that the Employment Tribunal in coming to its conclusion clearly had in mind the whole contractual territory within the total situation occupied by the parties. We do not consider that the Employment Tribunal ignored the written terms but considered them along with other matters as it considered it was bound to do by the decision in Dacas .

[70]We do not wish to minimise the force of Mr Malik's detailed skeleton and his careful submissions but they can be put very shortly. In effect Mr Malik submitted that both the Employment Tribunal and the EAT are bound by the decision in Dacas . This decision cannot be distinguished and must be followed. The brevity with which that submission can be put perhaps underlines its strength. Conclusions

[71]We are unable to accept that the Dacas decision can be distinguished on its facts. The fact that in the present case Mr. Muscat did not contract directly with Abraxas, but E-Nuff, his service company did, is a distinction without any difference. This is so, even were it not to be the case that the Employment Tribunal found that at all times prior to the agreements entered into on 13 th August 2002, Mr Muscat was in point of law an employee of EIL and then Cable & Wireless.

[72]Just as in Dacas , the employment agency Abraxas is interposed between the Applicant and the End-User, the Respondent, although the service company E-Nuff is interposed between the Applicant and Abraxas. The Respondent is the real and immediate recipient of the work done by Mr Muscat, and Abraxas, the Agency is made responsible for paying remuneration to E-Nuff for the benefit of Mr Muscat. If there were no interposed employment agency there would be no doubt that, even in the absence of an express contract, Mr Muscat worked under a contract of service with the Respondent. This indeed was expressly found to be the case by the Employment Tribunal for the period after the TUPE transfer took effect. The Respondent thereafter continued to manage and control the work done by Mr Muscat in the mutual expectation that he would be paid for what he was told to do and had in fact done.

[73]The commercial reality of the case was that to all intents and purposes Mr Muscat was working for Cable & Wireless, not Abraxas and not E-Nuff. We here use the word 'working' in a neutral and non-legal sense. His position cannot be distinguished in any material way from that of Mrs Dacas vis a vis Brook Street and the London Borough of Wandsworth. We bear in mind that Mrs Dacas's contract with Brook Street contained the provision "For the avoidance of doubt, the provisions contained in this Section shall not give rise to a contract of employment between Brook Street and the temporary worker, or the temporary worker and the client"

[74]Had Wandsworth remained a party to the Appeal, the Court of Appeal would have remitted the case to the Tribunal to consider whether there was an implied contract of service between Wandsworth and Mrs Dacas and to make findings on the issues of control and daily contact between them. Notwithstanding the provision we have just referred to, Mummery LJ (perhaps implicitly) and Sedley LJ expressly at paragraph 77, concluded that there was little doubt on the facts found by the Tribunal, and likely to be found, that Mrs Dacas was employed under a contract of service with Wandsworth.

[75]If Ms Palmer is to persuade us that the Employment Tribunal decision was wrong, she must persuade us that it should not have followed the decision in Dacas .

[76]In our opinion it would be a brave Employment Tribunal that decided it should not follow the decision in Dacas because it considered it was decided per incuriam . We consider that the points made by Ms Palmer are powerful points. It does not seem that the Court of Appeal was referred to Stevedoring and Haulage Services v Fuller

[2001] IRLR 358

. It certainly did not expressly refer to the well established principle that one cannot imply a contractual term, if to do so would be contrary to express terms of an agreement. We would agree that the principle would seem to apply equally to the implication of a contract. There are two points to consider. Firstly as the Employment Tribunal itself noted, the contractual provisions relied upon by Ms Palmer are terms agreed between Mr Muscat (or E-Nuff) and Abraxas, not between Mr Muscat (or E-Nuff) and Cable & Wireless. Secondly and more fundamentally, in our opinion the majority of the Court of Appeal seem to us to have taken a conscious decision to extend radically the circumstances in which a contract of employment might be implied. It considered that such a contract should be implied in circumstances where otherwise the 'contractor' would be employed by no one and was as a matter of commercial reality, the employee of the 'end user'. It is clear that the Court of Appeal were well aware of the provision we have just referred to in the contract between Brook Street and Mrs Dacas that declared that nothing in that contract should give rise to a contract of employment between her and Brook Street, or between her and the client. We say the Court of Appeal were well aware of the provision because it is set out at paragraph 31 of the judgement. Despite this provision the Court of Appeal held that in ascertaining the overall legal effect of the triangular arrangements on the status of Mrs Dacas, the Tribunal should not focus so intently on the express terms of the written contracts entered into by Brook Street with Mrs Dacas and Wandsworth. It should not be deflected from considering finding facts relevant to a possible implied contract of service between Mrs Dacas and Wandsworth in respect of the work actually done by her exclusively for Wandsworth at its premises and under its control, until it took the initiative in terminating that arrangement; see paragraph 52.

[77]At paragraph 17 which we have set out earlier, Mummery LJ was at pains to stress that although the construction of the contractual documents was important, it was not necessarily determinative of the contract of service questions, as contractual documents do not always cover all the contractual territory or exhaust all the contractual possibilities. It was necessary, he said, to consider the total situation occupied by the parties. The relevant evidence included, but was not necessarily confined to, the contractual documents.

[78]Mummery LJ made clear that the formal written contracts between Mrs Dacas and Brook Street and between Brook Street and the Council relating to the work to be done by her for the Council may not tell the whole of the story about the legal relationships affecting the work situation. They did not, 'as a matter of law, necessarily preclude the implication of a contract of service between Mrs Dacas and the Council'.

[79]Ms Palmer's submissions in relation to the implication of terms and contracts being permissible only where necessary also have considerable weight. The relevant cases were never cited to the Court of Appeal. We are unable to say whether the implication of a contract of employment in Dacas or in the present case was necessary. It may be that the majority of the Court of Appeal considered that in the particular circumstances of the case it was necessary to imply a contract of employment because that 'would accord with practical reality and common sense' (paragraph 53).

[80]Mummery LJ made clear that the Court of Appeal intended its judgement to offer guidance to Employment Tribunals in cases such as the present. Despite Ms Palmer's powerful and persuasive submissions we are satisfied that the Employment Tribunal was correct to follow the guidance of the Dacas case and that we must also follow it and leave it to the Court of Appeal to determine whether in was decided per incuriam. The Court of appeal must decide, rather than we, as to whether the views of Munby J are to be preferred to those of the majority.

[81]We are not able to accept that the Employment Tribunal failed to consider the effect of the written agreements between Mr Muscat and Abraxas and between Abraxas and Cable & Wireless. They clearly did have regard to them but approached them having regard to the guidance offered by Mummery LJ, by placing greater weight on their consideration of the 'total situation occupied by the parties'.

[82]We are minded in the circumstances of this case to give Cable & Wireless permission to appeal to the Court of Appeal, should such permission be sought.