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United Kingdom Employment Appeal Tribunal


You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Green v SIG Trading Ltd (Jurisdictional Points: Working outside the jurisdiction) [2017] UKEAT 0282_16_2405 (24 May 2017)
URL: http://www.bailii.org/uk/cases/UKEAT/2017/0282_16_2405.html
Cite as: [2017] WLR(D) 458, [2017] UKEAT 0282_16_2405, [2017] ICR 1274

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Appeal No. UKEAT/0282/16/DA

 

 

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8AE

 

 

                                                                                                             At the Tribunal

                                                                                                             On 28 April 2017

                                                                            Judgment handed down on 24 May 2017

 

 

 

Before

HER HONOUR JUDGE EADY QC

(SITTING ALONE)

 

 

 

 

 

 

 

MR J GREEN                                                                                                APPELLANT

 

 

 

 

 

SIG TRADING LTD                                                                                   RESPONDENT

 

 

 

Transcript of Proceedings

 

JUDGMENT

 

 

 


 

 

 

 

 

 

 

APPEARANCES

 

 

 

 

 

For the Appellant

MR EDWARD KEMP

(of Counsel)

Instructed by:

Slater & Gordon (UK) LLP

50-52 Chancery Lane

London

WC2A 1HL

 

 

For the Respondent

MR BRUCE CARR

(One of Her Majesty’s Counsel)

Instructed by:

Messrs Pinsent Masons LLP

1 Park Row

Leeds

LS1 5AB

 

 

 


SUMMARY

JURISDICTIONAL POINTS - Working outside the jurisdiction

 

Jurisdiction - working outside Great Britain

The Respondent was a British company, which employed the Claimant as Managing Director of its business in the Kingdom of Saudi Arabia (“KSA”).  The Claimant had lived in the Middle East for some years and had no home in the UK.  He continued to live in Lebanon, commuting to work in the KSA for two to four days each week.  Given that the KSA operation had only recently been established, the Claimant reported to a manager based in the UK and other staff and support services were also located in the UK.  Further, when offered the position, the Claimant was given one of the Respondent’s standard UK contracts which recorded that it was to be governed by English law and included references to British statutory employment protections.  The ET found, however, that the budget for the KSA operation was an independent item within the UK budget and was administered separately.  Balancing the various factors, it concluded that the Claimant was an expatriate employee who had stronger connections to KSA and the Middle East than to Great Britain and British employment law, and thus that it did not have jurisdiction to hear the Claimant’s claims.  The Claimant appealed.

Held: allowing the appeal in part

The ET had been entitled to find that the KSA operation for which the Claimant was employed was subject to an independent budget, administered separately and to see this as a case where it was appropriate to balance the competing considerations in assessing whether the stronger connection was really with Great Britain and British employment law.  In so doing, however, the ET had disregarded the fact that the parties had agreed the Claimant’s contract should be governed by English law.  It was not suggested that the contractual term in this regard did other than properly represent the parties’ intentions and it was therefore wrong of the ET to have regard to the Respondent’s subjective explanation for this and to dismiss it as a relevant factor.  Although the ultimate assessment as to the weight to be given to this and other factors was for the ET, the apparent failure to have regard to a relevant matter rendered the conclusion unsafe and the appeal would be allowed on this basis.

 


HER HONOUR JUDGE EADY QC

 

Introduction

1.               I refer to the parties as the Claimant and Respondent, as below.  This is the Full Hearing of the Claimant’s appeal from a Judgment of the Employment Tribunal sitting at Bradford (Employment Judge Hepworth, sitting on 21 July and 2 August 2016; “the ET”), sent to the parties on 18 August 2016.  Mr Kemp appeared for the Claimant below, as he does on the appeal; the Respondent was also represented before the ET by counsel, although not by Mr Carr QC who now appears.  By its Judgment, the ET held it did not have jurisdiction to hear the Claimant’s claims under the Employment Rights Act 1996 (“the ERA”) - holding that the Claimant was an expatriate employee, whose employment had stronger connections to Saudi Arabia and the Middle East than to Great Britain and British law; his appeal against that decision was permitted to proceed to a Full Hearing by Simler P on the paper sift.

 

The relevant factual background and the ET’s decision and reasoning

2.               The ET’s decision was based upon an agreed statement of facts, supplemented by findings made after hearing evidence from the Claimant (giving evidence by video link from the United Arab Emirates) and Mrs Kennedy-McCarthy, from the Respondent’s Human Resources team.  The following summary is taken from the findings recorded by the ET.

 

3.               The Respondent is a limited company, registered in the United Kingdom; it is a subsidiary of a UK plc.  The Claimant is married to a Lebanese national and has lived (with his family) in the Middle East for over 15 years (he has no private residence in the UK).  From 2013, he had provided consultancy services for the Respondent through his firm. 

 

4.               In March 2014, the Respondent began an interview process for the post of Managing Director for the Kingdom of Saudi Arabia (“KSA”); the Claimant was invited to a meeting with Mrs Kennedy-McCarthy in Sheffield (where the Respondent is registered) relating to this position, to which he was appointed with effect from 1 May 2014.

 

5.               On taking up his new post, the Claimant continued to live in Lebanon, commuting to work in KSA two to four days at a time, with the Respondent then paying for his accommodation.  Although the Respondent registered the Claimant with HMRC, he was treated as exempt from UK tax or national insurance contributions.  The Claimant’s contract referred to his ‘secondment’ in KSA but the ET found that did not accurately represent the position: there was no secondment; the Claimant was appointed as Managing Director in KSA, where he worked for the majority of the time, albeit on limited occasions he was required to attend the UK for training and for some meetings relating to the Respondent’s KSA business operations.  The Claimant’s contract was, however, expressly stated to be governed by English law (and, indeed, his claim for breach of contract had been permitted to proceed in the ET) and referred to British employment legislation and UK policies concerning ethics, corporate responsibility, anti-bribery and corruption; it also included a mobility clause, which allowed that the Claimant might be required to work in the UK, and post-termination covenants relating to the UK and Ireland.  The ET found the Respondent had found it convenient to give the Claimant a standard UK contract, amended in some parts, and noted that he had been unable to join the Respondent’s pension scheme as he was not working in the UK.  It was also the case that IT, HR and payroll support was based in the UK as was the Claimant’s line manager and the three employees who reported to him; he was, further, paid in UK pound sterling.  That said, the Claimant’s employment was stated to be subject to his being permitted to hold a residence visa and work permit such as would allow him to effectively carry out his role and the ET found that could only refer to the KSA; it was common ground that it was the Claimant’s responsibility to secure the appropriate visa and work permit.

 

6.               Due to local legal requirements, the Respondent traded in KSA in partnership with a local company, and the Claimant was therefore based in the Riyadh office of that partner, Fanar Trading Ltd.  The ET further recorded that it had been important to the Respondent that the Claimant worked in KSA as it had previously attempted to obtain business with an employee not based there and it had not worked:

“5.6. … the claimant was appointed in order to be on the ground in Saudi Arabia to develop business there. …”

 

The ET further continued:

“5.6. … in practice the Saudi Arabia budget was independent of the company’s UK financial budget, illustrated in particular by the fact that when the Saudi Arabia business was closed because of poor financial performance the Saudi Arabian losses were not absorbed into the company’s UK finances. …”

 

7.               Moreover, although initially the Claimant’s bonus was calculated by reference to the overall group performance, the ET found that was because the KSA business had not made a profit and the Respondent wanted to be fair to the Claimant.

 

8.               The decision to dismiss the Claimant by reason of redundancy was taken in the UK - by the Respondent’s Board of Directors in Sheffield - and handled by the Respondent’s HR Director for UK and Ireland; the ET found that this was a pragmatic arrangement as HR matters for the new business area in KSA continued to be dealt with from the UK.  The Claimant appealed against that decision and his appeal was heard in Sheffield, the hearing being chaired by Mrs Kennedy-McCarthy, with the Claimant attending via Skype.

 

9.               The ET listed what it saw as the competing factors both for and against the Claimant’s contention that it had territorial jurisdiction to determine his claims notwithstanding that his normal place of employment was outside the UK.  It concluded, however, that there was not a strong connection between the Claimant’s employment and Great Britain and British employment law: he was an expatriate employee, not working for the benefit of a business in Great Britain but developing an entirely new business selling to new contractors in KSA, pursuant to local laws and customs; as such he had stronger connections to KSA and the Middle East.  Specifically, the ET concluded:

“8.3.1. The normal rule for an ex patriot employee is that the Act does not apply.

8.3.2. The claimant has lived in Lebanon for 10 years with a Lebanese wife.  He commuted to work in Riyadh.  He paid no UK tax or national insurance.  He did not sell as an extension of a business in the UK.  He had no property in the UK.  The respondent paid for his accommodation in Riyadh.  Saudi Arabian operations were funded from a separate budget.  The claimant’s business visits to the UK were limited in number.  He was not part of the respondent’s pension scheme as he lived abroad.  It was his duty to obtain the appropriate work permits and visas.”

 

The relevant legal principles

10.            The Claimant’s claims were brought under the ERA, which is silent as to its territorial scope, meaning that is a matter of statutory interpretation, giving effect to what Parliament may reasonably be supposed to have intended in the particular circumstances, see per Lord Hoffmann at paragraph 23 Lawson v Serco Ltd [2006] ICR 250 HL.  In the case of the expatriate employee, Lord Hoffmann expressed the view that “the circumstances would have to be unusual for an employee who works and is based abroad to come within the scope of British labour legislation” (see paragraph 36 Lawson), but allowed that - where, at least, the employer was based in Great Britain - there would be cases where such an employee could do so, although the fact that the employee happened to be British or was recruited in Britain would not be enough - something more would be required; that “something more” might, Lord Hoffmann opined, be provided by the fact that:

“38. … the employee is posted abroad by a British employer for the purposes of a business carried on in Great Britain.  He is not working for a business conducted in a foreign country which belongs to British owners or is a branch of a British business, but as representative of a business conducted at home. …”

 

11.            As a possible example of such a posted worker Lord Hoffmann cited the case of the foreign correspondent of a British newspaper, posted abroad, where he or she might live for many years, but who would remain, nevertheless, a permanent employee of the newspaper.  More specifically, Lord Hoffmann referenced the case of Financial Times Ltd v Bishop UKEAT/0147/03, which had involved a sales executive who had originally worked for the newspaper in London but, by the time of his dismissal, had been working in San Francisco, selling advertising space for the paper, for three years.  The EAT had set aside the original ET decision in Mr Bishop’s favour, holding that further findings of fact were required to determine whether he was settling advertising space in San Francisco as part of the business which the Financial Times conducted in Britain or whether he was working for a business which “… the “Financial Times” or an associated company was conducting in the United States: for example, by selling advertising in the “Financial Times” American edition”.  If the latter, Lord Hoffmann opined that the ET would not have jurisdiction: it would be “a clear case of employment in a foreign business” (see paragraph 38 Lawson).

 

12.            Observing that the examples cited in Lawson were illustrative and did not purport to lay down a closed list of cases, in Duncombe v Secretary of State for Children, Schools and Families (No 2) [2011] ICR 1312 SC, Baroness Hale, giving the judgment of the Court, observed that the right to bring claims in the ET:

“8. … will only exceptionally cover employees who are working or based abroad.  The principle appears to be that the employment must have much stronger connections both with Great Britain and with British employment law than with any other system of law. …”

 

13.            In Duncombe, the Court was concerned with the case of a teacher employed by the UK government at a school in Germany, which was one of a group of schools throughout Europe for children of parents working in European institutions.  The Supreme Court rejected the Secretary of State’s case that this did not fall within the exceptional categories of case identified in Lawson, concluding:

“16. In our view, these cases do form another example of an exceptional case where the employment has such an overwhelmingly closer connection with Britain and with British employment law than any other system of law that it is right to conclude that Parliament must have intended that the employees should enjoy protection from unfair dismissal.  This depends upon a combination of factors.  First, as a sine qua non, their employer was based in Britain; and not just based here but the Government of the United Kingdom.  This is the closest connection with Great Britain that any employer can have, for it cannot be based anywhere else.  Second, they were employed under contracts governed by English law; the terms and conditions were either entirely those of English law or a combination of those of English law and the international institutions for which they worked.  Although this factor is not mentioned in Lawson v Serco Ltd, it must be relevant to the expectation of each party as to the protection which the employees would enjoy. …”

 

14.            That Lord Hoffmann had not laid down closed categories of exceptional cases was further emphasised in the next case to reach the Supreme Court, Ravat v Halliburton Manufacturing and Services Ltd [2012] ICR 389 SC.  Mr Ravat’s UK based employer had posted him to work for alternating four week periods in Libya (he otherwise returned to the UK, where he lived), working under a contract stated to be subject to UK law, and paying UK tax and national insurance contributions on his earnings.  Considering the approach that should be adopted, the Court concluded it was neither necessary nor helpful to try to fit the circumstances of this case into the categories enumerated by Lord Hoffmann in Lawson; the starting point in each case, Lord Hope concluded, was:

“27. … that the employment relationship must have a stronger connection with Great Britain than with the foreign country where the employee works.  The general rule is that the place of employment is decisive.  But it is not an absolute rule.  The open-ended language of [the statute] … leaves room for some exceptions where the connection with Great Britain is sufficiently strong to show that this can be justified. …”

 

Continuing:

“28. The reason why an exception can be made in those cases is that the connection between Great Britain and the employment relationship is sufficiently strong to enable it to be presumed that, although they were working abroad, Parliament must have intended that [the statutory protection] … should apply to [those employees] … It will always be a question of fact and degree as to whether the connection is sufficiently strong to overcome the general rule that the place of employment is decisive.  The case of those who are truly expatriate because they not only work but also live outside Great Britain requires an especially strong connection with Great Britain and British employment law before an exception can be made for them.”

 

15.            It was seen as relevant in Mr Ravat’s case that he had initially worked for his employer in London and, when he had been posted to Libya, had sought reassurance as to whether he would continue to have protection under British employment law and that:

“33. … The documentation he was given indicated that it was the employer’s intention that the relationship should be governed by British employment law.  This was borne out in practice, as matters relating to the termination of his employment were handled by the employer’s human resources department in Aberdeen.  This all fits into a pattern, which points quite strongly to British employment law as the system with which his employment had the closest connection.”

 

16.            When thus required to carry out a comparative assessment so as to determine the relevant “closest connection”, practical guidance as to how the fact finding tribunal should proceed was provided by the Court of Appeal in Bates van Winklehof v Clyde & Co LLP and Anor [2013] ICR 883.  Where an individual is employed wholly abroad, Elias LJ observed:

“98. … There is then a strong connection with that other jurisdiction and Parliament can be assumed to have intended that in the usual case that jurisdiction, rather than Great Britain, should provide the appropriate system of law.  In those circumstances it is necessary to identify factors which are sufficiently powerful to displace the territorial pull of the place of work, and some comparison and evaluation of the connections between the two systems will typically be required to demonstrate why the displacing factors set up a sufficiently strong counter-force. …”

 

17.            As for the respective roles of the first instance tribunal of fact and the appellate tribunal, in Lawson, Lord Hoffmann opined:

“24. … the fact that we are dealing in principles and not rules does not mean that the decision as to whether [the statutory protection] … applies (and, therefore, whether the employment tribunal has jurisdiction) is an exercise of discretion.  The section either applies to the employment relationship in question or it does not and … I think that is a question of law, although involving judgment in the application of the law to the facts. …”

 

 

And continued, under the sub-heading “Fact or law?”:

“34. … Whether one characterises this as a question of fact depends … upon whether as a matter of policy one thinks that it is a decision which an appellate body with jurisdiction limited to errors of law should be able to review.  I would be reluctant, at least at this stage in the development of … [the] jurisprudence, altogether to exclude a right of appeal.  In my opinion, therefore, the question of whether, on given facts, a case falls within the territorial scope of [the statutory protection] … should be treated as a question of law.  On the other hand, it is a question of degree on which the decision of the primary fact-finder is entitled to considerable respect. …”

 

18.            Subsequently, in Ravat, SC, Lord Hope observed:

“29. … The question whether, on given facts, a case falls within the scope of [the statutory protection] … is a question of law, but it is also a question of degree. … The question of law is whether [the statutory protection] … applies to this particular employment.  The question of fact is whether the connection between the circumstances of the employment and Great Britain and with British employment law was sufficiently strong to enable it to be said that it would be appropriate for the employee to have a claim for unfair dismissal in Great Britain.”

 

And cautioned:

“35. As the question is ultimately one of degree, considerable respect must be given to the decision of the employment tribunal as the primary fact-finder. …”

 

19.            In Jeffery v The British Council [2016] IRLR 935 EAT, HHJ Richardson understood Lord Hope to be affirming the approach laid down by Lord Hoffmann in Lawson: the question was one of law, although:

“15. … The primary fact finder’s decision in a case of this kind is entitled to particular respect not least because (1) it is the decision of a specialist judge; (2) the judge heard all the evidence, and it is not always easy to capture in a set of reasons the overall impression given by the evidence; and (3) although ‘on given facts … the scope [of the statutory protection] … is a question of law, … it is also a question of degree’ (Lord Hope in Ravat at paragraph 29).”

 

20.            It appears from the report, however, that an earlier decision of the EAT (Langstaff P), in Olsen v Gearbulk Services Ltd [2015] IRLR 818, was not cited to HHJ Richardson in Jeffery.  In Olsen, Langstaff P referred back to Lawson, noting the caveat expressed by Lord Hoffmann at paragraph 34 (see above) - “at least at this stage in the development of … [the] jurisprudence” - and opined that the time may now have come to treat the question of ‘sufficiently close connection’ as one of fact, such that a decision by an ET, properly directing itself as to the applicable law, with regard to appropriate cases, would disclose no error of law unless it were shown to be perverse (see paragraph 36 Olsen).

 

The Appeal

21.            The Claimant pursues the following three grounds of appeal:

(1)        The ET erred in its application of Lawson, wrongly failing to find that the Claimant was working in KSA as part of a business conducted in the UK.

(2)        Alternatively, the ET erred in its approach to the comparative exercise it had to undertake: it had erroneously evaluated the factors showing a connection with Great Britain and British employment law as in the “minority” and had wrongly had regard to what it found to be the subjective intention of the Respondent (its reason for using a British contract “for convenience”, for example) rather than applying an objective test.

(3)        Further, the ET had reached a perverse conclusion in finding that the KSA budget was independent of the UK budget as “illustrated in particular by the fact that when the Saudi Arabia business was closed because of poor financial performance the Saudi Arabian losses were not absorbed into the company’s UK finances”; there was no evidence for that finding.

 

Submissions

The Claimant’s case

22.            In terms of the approach I should adopt, the Claimant urged that the appeal properly raised a question of law, see per Lord Hoffmann in Lawson (paragraphs 24 and 34, cited above) and per Lord Hope in Ravat (paragraphs 29 and 35, cited above), authorities that were obviously binding on the EAT.

23.            In pursuing the first ground of appeal, whilst accepting this was an expatriate worker case, the Claimant contended the ET had wrongly distinguished his circumstances from that of the hypothetical journalist Lord Hoffmann had allowed (referencing the earlier case of Financial Times v Bishop) would fall within the ET’s jurisdiction.  The ET had done so on the basis that the Claimant “was not selling to suppliers as an extension of business carried on in the UK but was developing an entirely new business, selling to new contractors in a new country pursuant to Saudi Arabian laws and customs” (paragraph 7.4 of the ET’s Reasons), but that was focusing on the Claimant’s job role and duties and failing to look at who, in reality, he was working for whilst working overseas; undertaking that exercise required the ET to ask whether the Claimant was working for the purpose of a business carried on in Great Britain or for a business conducted abroad (see the illustrative examples provided in cases such as Lodge v Dignity & Choice in Dying [2015] IRLR 184 EAT, where the fact that the Claimant’s work was for the for the Respondent’s London operation was held to be key).  On the facts, there was no separate legal entity in KSA; the Claimant was working there as part of a business conducted in the UK and as such should have been treated as a posted worker, falling within one of the sub-categories envisaged in Lawson; the Claimant was working for no entity other than the UK based Respondent and, had the ET asked the correct question, it would have been bound to conclude that the Claimant fell within Lord Hoffmann’s “posted worker” exception.

 

24.            In the alternative, the ET had erred in failing to carry out an assessment of the various factors relevant to its task on an objective basis.  Specifically, it looked at what it found to be the Respondent’s subjective intent in giving the Claimant a UK contract (“convenient …”, see paragraph 5.8) and as to why decisions regarding his employment were taken in the UK (“purely pragmatic …”, paragraph 5.11).  The ET then placed significant reliance on those factors in its conclusions, discounting factors pointing in favour of a UK connection because of what it had found to be the Respondent’s subjective intention.  It had also failed to have regard to relevant matters, such as the parties’ choice of law (a particularly relevant factor, see per Baroness Hale in Duncombe) or to the strength of any connection to KSA employment law (there was none) and the contractual position was significant given the absence of any finding that the Claimant’s contract was a sham or failed to reflect the reality.

 

25.            By his third ground of appeal, the Claimant further argued that the ET had reached findings of fact as to the separation of the Respondent’s KSA budget that were absent proper evidential foundation and thus perverse.  These were matters that could not be ignored: the ET had relied on these factors in its conclusions.

 

The Respondent’s case

26.            First on approach, the Respondent contended this was now properly to be characterised as a question of fact, per Langstaff P in Olsen.  Lord Hoffmann’s description of the issue as a question of law was subject to the caveat that this was “at least at this stage”; Lawson was the first time the House of Lords had ruled on the point but it had since been considered twice more by the Supreme Court (Ravat and Duncombe) and there were four additional Court of Appeal cases and at least 14 decisions of the EAT on point.  In Olsen, Langstaff P was saying the time had been reached such that this could be treated as a question of fact, not law. 

 

27.            On the first point of challenge, the ET had been entitled to find that the business on which the Claimant worked in KSA was funded from an independent budget (and see below in respect of the third ground) and to reject the Claimant’s contention that he was working “as part of a business conducted in the UK”.  It was wrong to say the real question was who was the Claimant working for?  In Lawson (see paragraph 38) the example given stressed the what, not the who.  The question was: for what purpose was the Claimant working - for the purposes of a British business or for the purposes of a business (albeit owned by British entity) abroad?  In the present case, the ET had permissibly found the Claimant was working abroad for the purposes of a business based abroad; it was a new business, operated according to KSA laws and customs, subject to a separate budget within the Respondent’s UK budget: the Claimant did not - and could not - say the ET reached a perverse conclusion on that basis.

 

28.            As for the second ground, the ET had correctly directed itself as to the comparative exercise it was required to undertake (per Bates) and had then proceeded to carry out the requisite assessment (see paragraphs 7.2 and 7.3 of the Reasons).  It was not required to reference KSA employment law but had made a number of findings as to the connection with KSA (the separate web-site, and email address referring to KSA, the fact that the Claimant’s place of work was in KSA and meetings in the UK related only to matters concerning the KSA business operations, etc).  There was no error of law in the ET having regard to the parties’ intentions; that was plainly relevant to the nature of the employment and the ET was entitled to look to see how the factors that needed to be weighed in the balance had come about.  In any event, in so far as there was any reference to the Respondent’s subjective view, that was only in relation to a limited range of facts: contractual references and the management of the Claimant.  It was relevant for the ET to have regard to how these factors had come about (see the approach adopted in Duncombe and Ravat): pragmatic convenience rather than anything more significant.  And the fact that some of the provisions of the Claimant’s contract simply could not apply to his employment in KSA (such as the restrictive covenants which referenced the UK or the fact it suggested that normal working days would be Monday to Friday) supported both the ET’s approach and conclusions.

 

29.            As for the perversity challenge raised by the third ground, on the finding of there being a separate budget for the KSA, there were numerous references in the evidence to support the ET’s permissible finding in this regard (including as confirmed by the Claimant in cross-examination).  Whilst there was not the same evidential basis for the finding that the KSA losses were not absorbed into the UK finances, that was simply an illustrative example of the (legitimate) primary finding and the ET was not relying solely on that example as establishing that there was an independent budget.

 

Discussion and conclusions

30.            I start with the third ground of appeal - the perversity challenge.  It was common ground before the ET that the Claimant was employed by a UK based company: although the Respondent operated in KSA in partnership with a local entity, it remained the employer; there was no separate legal entity that became the Claimant’s employer.  It was, moreover, an agreed fact before the ET that the operation in KSA was part of the accounting and financial reporting for the UK; part of the UK accounts, as both Mrs Kennedy-McCarthy (for the Respondent) and the Claimant testified.  That said, both Mrs Kennedy-McCarthy and the Claimant spoke of a KSA budget, within which the KSA operation had to operate.  To the extent the ET found there was thus a separate budget for the Respondent’s KSA business within the UK budget, I cannot see that this was perverse.

 

31.            The Claimant objects, however, to the ET’s further finding, that the KSA budget was “independent” of the UK financial budget and “was in practice administered separately”. 

 

32.            In assessing whether this represents a finding that can be said to be perverse, it seems to me that it rather depends on what the ET was actually saying.  The Claimant argues this is made apparent by the ET’s further conclusion that the KSA budget was independent of the UK budget, as illustrated by the fact that when the KSA operation closed, its losses were not absorbed into the Respondent’s UK finances - a conclusion unsupported by the evidence.  On that latter point - the absence of evidential foundation for the finding that KSA losses were not absorbed into UK finances - the Claimant is correct: the finding seems to have been derived from the Respondent’s closing submissions and Mr Carr QC is unable to point to any actual evidential basis for that contention, observing that it might have been more of an “impression” derived from the evidence.  The real question is, however, whether this additional finding goes anywhere: does it render unsafe the ET’s more general conclusion as to the separate nature of the KSA budget?

 

33.            In my judgment, it does not.  The ET had plainly picked up the point from the Respondent’s closing submissions and saw it as illustrative of the broader finding, but I do not consider I can sensibly find that its underlying conclusion - that the KSA budget could be seen as an independent item within the UK budget, administered separately - was solely dependent upon this illustrative example.  What the ET plainly considered material was its more general finding that KSA operations were funded from a separate budget.  Reading the ET’s reasoning as a whole, it is apparent that its findings that the budget was “independent” and “administered separately” were simply more nuanced ways of saying there was a separate KSA budget, within the overall UK budget; a conclusion firmly supported by the evidence (specifically, the Claimant accepted in cross-examination that money had been “earmarked for the Saudi Arabian business” and that “the KSA operations had to be from the constraints of a KSA budget”, further observing that there was “an item in [that] budget for HR support” and he was looking for an HR manager; similarly, at paragraph 46 of his witness statement, where he referred to “the allocated resource for personnel in the budget specifically for Saudi Arabia”).  For those reasons, this third ground of appeal must fail.

 

34.            I turn then to the second ground of appeal, which takes issue with the ET’s approach to the comparative assessment - the determination as to whether the Claimant’s employment had the stronger connection to Great Britain and British employment laws or to the KSA.

 

35.            On this ground, I accept the Claimant’s submission that the factors relevant to the ET’s assessment should be viewed objectively, not through the parties’ eyes and not as they might seek to explain those factors away.  That said, I do not consider that an ET is thus unable to have regard to the wider context; just as context can be relevant in a question of contractual construction, it must be open to an ET to have regard to the broader picture when determining what - if any - weight it should give to particular factors.  The issue in this case is whether the ET wrongly allowed broader context to blind it to factors that were objectively relevant to the assessment it had to make.

 

36.            The focus of the Claimant’s objection under this ground relates to the ET’s findings (1) that UK terms and conditions were used “because of convenience” (“The respondent found it convenient to give to the claimant a standard UK contract amended in some parts” because it “did not have a standard form document appropriate for Saudi Arabia”), and (2) that management decision-making regarding the Claimant had been made in the UK for purely pragmatic reasons (“because HR matters relating to the claimant’s new business area were dealt with from the UK”).  The Claimant further observes that the fact the contract of employment is governed by British law has to be a significant factor (see Duncombe) and the ET had both failed to accord the appropriate respect to this issue in the present case and to ask itself whether (undertaking the requisite comparative assessment required) the parties had really intended that the Claimant’s rights should be those provided under KSA law.

 

37.            In considering these submissions it is helpful to bear in mind that although it was open to the parties to agree that the contract of employment would be governed by British law (and there was no issue as to the ET’s jurisdiction to determine the Claimant’s breach of contract claim), whether or not the Claimant could benefit from the relevant statutory protections was not something that could be determined by the Respondent (regardless of any references to the ERA or other statutory provision within the contract); that would always be a matter for the ET as a question of statutory construction.  That said, the fact the contract was expressly stated to be subject to British law was a material matter.  The ET might have been entitled to disregard references to British statutory protections, or post-termination covenants that related to “UK and Ireland territories”, as simply examples of standard form terms and conditions arising from the use of the Respondents general, ‘off the shelf’, contract, but to fail to take into account the parties’ agreement as to the applicability of British law would be to ignore a factor relevant to the assessment of any connection between the Claimant’s employment and to Britain and British employment law.  Moreover, this was not a factor that could simply be discounted by virtue of the fact that the Respondent had used its standard form UK contract, as a matter of “convenience”: it was not being suggested that the relevant contractual term - that the contract would be governed by British law - did not accurately reflect the parties’ agreement; on the contrary, it was accepted that it was binding. 

 

38.            This, it seems to me, is a different point from that arising from the ET’s discounting of the UK-based management decision-making.  That was a factor that the ET fairly saw as supporting the Claimant’s case but considered had to be seen in context, allowing for the fact that the KSA business was newly founded and the Respondent did not have other organisational support in the KSA at that stage.  The ET concluded this was simply a pragmatic arrangement and said little about any connection between the Claimant’s employment and Great Britain.  That was a permissible conclusion; the ET legitimately having regard to the broader context in determining the weight to be given to that factor.  Returning to the parties’ agreement that the contract should be governed by British law, however, I am unable to see that it was properly open to the ET to simply disregard this by virtue of the Respondent’s evidence that this was for “convenience”.  On this point, I consider the Claimant is correct: the ET wrongly disregarded a relevant factor - that the parties had entered into a binding contractual agreement as to the applicability of British law - because it had regard to the Respondent’s subjective explanation rather than to the objective fact.

 

39.            The question then arises as to where this goes.  The Claimant - bringing in his first ground of appeal - says that this is really a question of law: taking into account all relevant factors (including the fact that the Claimant’s contract of employment was governed by British law), the ET ought to have found this was a “posted worker” case, falling within the exceptional category identified by Lord Hoffmann in Lawson.  I am, however, not persuaded that is correct.  Primarily that is because I consider Langstaff P was correct when (in Olsen) he concluded that the time may have come to treat this as a question of fact: the legal test is that of ‘sufficiently close connection’, as explained in particular by the triumvirate of House of Lords and Supreme Court decisions in Lawson, Duncombe and Ravat; it is then a question of fact for an ET, properly directing itself as to the applicable law, as to whether a sufficiently close connection has been made out on the particular facts.  Even if I am wrong in that respect, however, I do not accept that the ET was bound to find - as a matter of law - that the present case fell squarely within the “posted worker” category identified by Lord Hoffmann.  This was a case where a UK company was establishing a new business in the KSA and the ET was entitled to find a degree of separation in that regard - to see it as akin to working for a business conducted in a foreign country, albeit belonging to British owners, or as a branch of a British business (Lawson, paragraph 38).  I am satisfied that the ET was correct to see this as a case where it had to undertake a comparative assessment (per Elias LJ in Bates); the only question is whether it then failed to have regard to a relevant factor when carrying out this task.

 

40.            That brings me back to the ET’s disregard of the fact that there was a binding agreement between the parties that the contract would be governed by British law.  The ET was entitled to see this as just one of the factors it needed to weigh in the balance, although it would inevitably be an important factor for the reasons identified in Duncombe.  What I do not accept, however, is that the Respondent’s subjective explanation as to why it had entered into this agreement meant that it could simply be disregarded.  That is, however, what the ET’s reasoning suggests it did in this case and that, in my judgment, renders its conclusion unsafe.  On that basis, I consider I must allow the appeal - the ET having failed to have regard to that which was relevant (the agreement that the contract of employment would be governed by British law) or having had regard to that which was irrelevant (the Respondent’s subjective explanation as to why it had entered into that agreement - something that could not detract from the fact of the agreement). 

 

41.            Whilst, given my conclusion that this is a matter of fact and assessment for the ET, my preliminary view would be that I am required to remit the case to the ET for reconsideration in the light of my Judgment, I am conscious that the parties have only addressed me on the question of disposal in general terms and accordingly allow that they should have the further opportunity to make written submissions in this respect, which should be exchanged and lodged within 14 days of the handing down of this Judgment. 


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URL: http://www.bailii.org/uk/cases/UKEAT/2017/0282_16_2405.html