Massey v Crown Life Insurance Co
[1978] 2 All ER 576(Judgment by: Lawton LJ)
Between: Massey
And: Crown Life Insurance Co
Judges:
Lord Denning MR
Lawton LJEveleigh LJ
Subject References:
EMPLOYMENT
UNFAIR DISMISSAL
CONTRACT OF SERVICE
Excluded classes of employment
Employment under contract for services
Employer and manager agreeing for tax purposes that manager to be self-employed in the future
Inland Revenue accepting arrangement
Manager operating under firm name rather than own name
Manager continuing to perform same duties as before
Manager dismissed and bringing claim for unfair dismissal
Whether manager an individual who has entered into or worked under a contract of employment
Whether manager an 'employee'
MASTER AND SERVANT
Distinction between contract of service and contract for services
Declaration of parties
Intention of employer and manager to change manager's status to self-employed for the purposes
Genuine agreement with explicit terms
Whether parties' agreement conclusive in determining status of manager
Legislative References:
Trade Union and Labour Relations Act 1974 - s 30(1) Sch 1, para 4(1)
Case References:
Alexander v Rayson - [1936] 1 KB 169; [1935] All ER Rep 185; 105 LJKB 148; 154 LT 205, CA
Construction Industry Training Board v Labour Force Ltd - [1970] 3 All ER 220; 5 ITR 290, DC; Digest (Cont Vol C) 685, 226a
Davis v New England College of Arundel - [1977] ICR 6, EAT
Ferguson v John Dawson & Partners (Contractors) Ltd - [1976] 3 All ER 817; [1976] 1 WLR 1213; [1976] 2 Lloyd's Rep 669, CA
Global Plant Ltd v Secretary of State for Social Services - [1971] 3 All ER 385; [1972] 1 QB 139; [1971] 3 WLR 269; Digest (Cont Vol D) 707, 6c
Graham (Maurice) Ltd v Brunswick - (1974) 16 KIR 158, DC
Inland Revenue Comrs v Duke of Westminster - [1936] AC 1; [1935] All ER Rep 259; 104 LJKB 383; 153 LT 223; sub nom Westminster (Duke) v Inland Revenue Comrs 19 Tax Cas 490, HL; 28(1) Digest (Reissue) 507, 1845
Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance - [1968] 1 All ER 433; [1968] 2 QB 497; [1968] 2 WLR 775; Digest (Cont Vol C) 722, 6b
Stevenson Jordon and Harrison Ltd v MacDonald and Evans - [1952] 1 TLR 101; 69 RPC 10, CA; 28(2) Digest (Reissue) 1086, 906
Challinor v Taylor - [1972] ICR 129; 116 Sol Jo 141
Comrs of Customs and Excise v Pools Finance (1937) Ltd - [1952] 1 All ER 775, CA
Evenden v Guildford City Association Football Club Ltd - [1975] 3 All ER 269; [1975] QB 917, CA
Hammett v Livingstone Control Ltd - (1970) 5 ITR 136
Market Investigations Ltd v Minister of Social Security - [1968] 3 All ER 732; [1969] 2 QB 173
Morren v Swinton and Pendlebury Borough Council - [1965] 2 All ER 349; [1965] 1 WLR 576, DC
Napier v National Business Agency Ltd - [1951] 2 All ER 264; 44 R & IT 413, CA
Watling v William Bird & Son Contractors Ltd - (1976) 11 ITR 70
Judgment date: 4 November 1977
Judgment by:
Lawton LJ
In the administration of justice the union of fairness, common sense and the law is a highly desirable objective. If the law allows a man to claim that he is a self-employed person in order to obtain tax advantage for himself and then allows him to deny that he is a self-employed person so that he can claim compensation, then in my judgment the union between fairness, common sense and the law is strained almost to breaking point. The appellant in this case is asking this court to adjudge that he is entitled to make claims with two different voices. The problem, it seems to me, is this: what was the status of the appellant at the material time in November 1975? At that time, for his own purpose, he had been claiming for over two years that he was a self-employed person and, if he was such, he could not claim compensation for unfair dismissal. The problem turns in my judgment on the surrounding facts and the terms of the contract.
I will start with the surrounding facts. In 1971 the appellant came into a business relationship with the respondents, a large life insurance office. He entered into two contracts in June 1971. The first appointed him to be manager. From then until the summer of 1973 the respondents treated him under that contract as an employee. But on the same day as he entered into a contract to be manager, he entered into another contract with the respondents to be a general agent. Clause 19 of that contract relating to general agency contains this provision: 'Nothing contained herein shall be construed to create the relationship of employer and employee between the Company and the General Agent.' Counsel for the respondents has told us, and it is almost certainly accurate and I would accept it as such, that in the world of insurance it is very common indeed to have freelance agents. The contract relating to general agency clearly made the appellant a freelance agent. The consequence of these two contracts running at the same time was that the appellant was wearing two hats, one as an employee and the other as a self-employed person. I can readily understand that by the summer of 1973 he felt that is was inconvenient for him to wear two hats, and somebody (maybe those with whom he worked or his accountant alerted) him to the advantages of wearing only one hat, namely that of being a self-employed person.
The fact that he had been wearing two hats for two years indicates to me that there was some ambiguity about his position with the respondents, and he was entitled, in my judgment, in the summer of 1973 to get that ambiguity cleared up. He did so, and the evidence shows that it was he who approached the respondents to be allowed to wear only one hat. They agreed that after the summer of 1973 he should only wear one hat. In order to ensure that he did wear only one hat, both he and the respondents entered into a new written agreement. It contains a large number of terms and, as counsel for the respondents pointed out to us, some of those terms (for example, the one which would have allowed his business of John L Massey and Associates to employ other persons in the course of his work as proprietor of the company) were fundamentally inconsistent with his being after the summer of 1973 merely an employee.
It is the existence of that written contract with its detailed terms which, in my judgment, distinguishes this case from Ferguson v John Dawson & Partners (Contractors) Ltd. It is relevant perhaps to point out that in Ferguson v John Dawson & Partners (Contractors) Ltd there was very little evidence indeed as to what the contract was. Such evidence as there was came from the defendants' foreman. According to the report of that case ([1976] 3 All ER 817 at 822, [1976] 1 WLR 1213 at 1220) all that happened was this. The foreman said: 'I did inform him that there were no cards, we were purely working as a lump labour force'; and, as Megaw LJ in his judgment pointed out, that being the situation, the court had to imply terms, and the terms which had to be implied were consistent solely with the relationship of master and servant. This case is entirely different. There are explicit terms; and it is interesting to note once again that, contemporaneously with the new agreement, there was executed an agreement which appointed the appellant to be general agent.
It clearly established that the parties cannot change a status merely by putting a new label on it. But if in all the circumstances of the case, including the terms of the agreement, it is manifest that there was an intention to change status, then in my judgment there is no reason why the parties should not be allowed to make the change. In this case, there seems to have been a genuine intention to change the status, and I find that the status was changed. It follows that there having been a change of status, the appellant cannot now say that there was not one.
In this connection it is relevant to see how the industrial tribunal approached the matter. They, like this court, were suspicious of the arrangement which was made in the summer of 1973. I must confess that, when I heard the facts of this case recounted by counsel on behalf of the appellant, I was equally suspicious. It seemed nothing more than a device to deceive the Inland Revenue in order to get a tax advantage. The industrial tribunal went into the facts and in the end came to the conclusion (and it is understandable once the full facts are discovered) that there had been a genuine attempt to make an agreement changing the appellant's status, and they excluded illegality. If there was no illegality, and it was a genuine arrangement, there could be only one consequence under the terms of the contract: the appellant changed his status. In those circumstances I can see nothing wrong with the approach which the appeal tribunal made. There was evidence to justify that approach and, in the circumstances, there can be no reason why this court should interfere with the findings of the industrial tribunal.
I too would dismiss the appeal.