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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Autoclenz v Belcher & Ors [2008] EWCA Civ 1172 (29 September 2008) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2008/1172.html Cite as: [2008] EWCA Civ 1172

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
(HIS HONOUR JUDGE PETER CLARK)

		Royal Courts of Justice Strand, London, WC2A 2LL
		29th September 2008

Lord Justice Pill:

1. This is an application for permission to appeal against a decision of the Employment Appeal Tribunal, HHJ Peter Clark sitting alone, dated 16 July 2008. The Tribunal allowed in part an appeal by Autoclenz Limited ("the applicants") against a decision of the employment tribunal in which it was held that the respondent and others were employees of the applicants and also were workers within the meaning of the relevant regulations.
2. The EAT held that the agreement with the respondents was not a sham. On analysis it was not a contract of employment but they were independent contractors. Nevertheless, the EAT went on to hold at paragraphs 23 to 25 that they were workers within the meaning of the regulations. There is no application to cross-appeal on the employee issue. It is unfortunate that the case where the worker issue has been considered in this court (the case of Wright v Redrow Homes (Yorkshire) Ltd [2004] ICR 1126) was not cited at any stage. It must also be kept in mind that, when the employment tribunal reached the decision it did, the case of Consistent Group v Kalwak [2007] IRLR 560 had not gone to the Court of Appeal so that the employment tribunal was considering the view of the law as to sham, which had been held in the EAT to exist but which was modified in the Court of Appeal.
3. The facts are set out in the decisions of both tribunals, and since we are granting permission I do not propose to set them out in detail again. Valeting work was involved; there was a written contract. It appears to be clear that the major object of the applicants in drafting the contract as it was was an endeavour, and in the event a successful one, to establish that the respondents were not their employees. It also bears upon the question whether they were workers. The relevant definition emerges from the Working Time Regulations which implement Council Directive 93/104/EC on working time. Regulation 2 (1) provides:

"'worker' means an individual who has entered into or works under (or, where the employment has ceased, worked under) -

(a) a contract of employment; or

(b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual."

According to the applicant, Mr Green, the written contract was properly construed. There was no obligation to perform the work personally, the condition being met in the factual document for subcontracting by the contracting party to others.

4. Giving the leading judgment in Kalwak, Rimer LJ stated, at paragraph 40, by reference to the decision of the Tribunal.

"The observations in 56 indicate that, in order to identify the true nature of the parties' contractual obligations, it will or may not be sufficient merely to look at what the parties have done under the contract (which is all the chairman appears to have done). It will instead be necessary to determine what their legal obligations were. In this case, for example, the fact that, let it be assumed, the claimants always accepted work when it was offered to them, did not mean that they were obliged to; and the 'obligations term' indicated that they were not. [I miss out a few lines.] If, however, Elias J was saying that it is or might be enough for a court or tribunal simply to look at a particular contractual terms and substitute for it a different one that it regarded as reflecting a more likely bargain between the parties, then I question the correctness of that. It is not the function of the court."

5. The employment tribunal made findings on the basis of the broader powers to construe a contract which appears to have been taken by the EAT in Kalwak. Mr Green relies on that. His submissions can be succinctly stated. First, applying that test, the meaning of the contract is clear. It permits subcontracting; it does not oblige the contracting party in the position of the respondents to do work personally. Secondly, he questions whether the EAT, having rightly held that the respondents were not employees, did it necessarily follow that there was no obligation of personal service? The finding against the contract of employment was on the basis of lack of mutual obligation. Is it possible in that event to go on to conclude that there was an obligation to give personal service?
6. Reference has been made to several passages in the determination of the employment tribunal. It did state at paragraph 19:

"The reality, therefore, in this case is that no one seriously expected any of the valeters to provide a substitute or, indeed, to refuse the work that they were offered from day to day."

7. Mr Green submits that that reasoning is undermined by their own consideration of the evidence, which appears at paragraph 16. At paragraph 19 the tribunal stated "that no one seriously expected any of the valeters to find a substitute". At paragraph 24 they stated:

"It is notable in this case that the clauses permitting substitution…were not introduced until 2007, many years after Mr Huntingdon, for example…first started with the respondent. As will appear below, I find it difficult to accept that these new clauses reflected the reality of what was agreed between the valeters and the respondent."

At paragraph 37:

"I am satisfied that the claimants are required to provide personal service under their agreements with the respondent notwithstanding the substitution clause that was introduced in 2007. I do not find that this clause reflects what was actually agreed between the parties, which was that the claimants would show up each day to do work."

They also referred, at paragraph 39, to the possibility that the last words of the regulation (client or customer) which I have cited were relevant. That question has not been the subject of submissions on the applicant's behalf.

8. In his judgment HHJ Peter Clark, at paragraph 24, affirmed the finding of the employment tribunal on the 'worker' issue and referred to three factors:

"(1) This was a contract whereby each Claimant undertook to do or perform personal service for the Respondent. The existence of the qualified substitution clause does not, in my judgment, undermine that element.

(2) The lack of mutuality of obligation, to provide and do work, fatal to a contract of service, does not prevent the contract in this case being a contract for the purposes of the limb (b) worker definition. On this aspect I accept Mr Edwards' submission.

There is then a reference to the tribunal's paragraph 39 to which I need not refer.

9. In Wright the court considered a situation in the building trade and held that the employment tribunal had been entitled to conclude that even though they were not employees, the respondents (the men in the respondents' position in the present case) were nevertheless workers under the regulations. Mr Green seeks to distinguish the facts of those cases on the basis to which I have referred, and in my judgment there are indeed arguable distinctions which may be made on the facts. Giving the leading judgment I stated at paragraph 8:

"The case turns upon whether the individual applicants had undertaken to do the work specified in the contract personally."

10. Both I, and Holman J in a concurring judgment, analysed the terms of that particular contract and concluded, as I put it at paragraph 25:

"Against that background each of the tribunals was in my judgment entitled to find that there was a "mutuality of obligation" (Roberts) or "a personal provision of services" (Wright)

At paragraph 26:

"In my judgment, the intention of the parties when the contract were made involved, in each case, an obligation on the applicants to do the work personally."

11. In my judgment this is a case where permission should be granted. There is certainly an argument in favour of the employment tribunal, particularly having regard to the principle that it is the expert industrial jury. Its views, as Holman J put it in Wright, should be respected, and it concluded in the passages to which I have referred that the true intention of the parties was that there was, as had been found to exist in Wright, an obligation to perform personally. I do not find easy, on the facts, the relationship between mutual obligation and the somewhat different question of undertaking to perform personally.
12. Reluctant though one is to challenge at a second stage what appears to be a finding of fact of the industrial jury, in my judgment the applicants have a real prospect of success in this case, and notwithstanding the difficulties involved I would grant permission.

Lord Justice Moses:

13. So would I.

Order: Application granted.