B e f o r e :
LORD JUSTICE THORPE
LORD JUSTICE MANCE
MR. JUSTICE NEUBERGER
|| (1) MOIRA TODD (Widow and Administratix of Peter Todd deceased and parent of Kerry Todd, deceased)
||(2) ROSEMARY WILLIAMS (Dependant and Administratix of the estate of Robert Holmes, deceased)
(3) TRACY WATERS (Widow and Administratix of the estate of Vincent Marshall, deceased)
- and -
(1) GODFREY ADAMS
(2) MALCOLM JOHN CHOPE
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
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ELIZABETH BLACKBURN QC and MICHAEL DAVEY
(instructed by Foot Anstey Sargent, Plymouth) for the Appellants
MR. MICHAEL NOLAN
(instructed by Nash & Co., Plymouth) for the Respondents
HTML VERSION OF JUDGMENT
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- The beam trawler "Margaretha Maria" capsized and sank with the loss of all hands in a position about 55 miles south-south-west of Lizard Point some time between 11th and 17th November 1997. The tragedy claimed the lives of the Vessel's Skipper, Robert Holmes, her Mate, Peter (known as John) Todd, and two deck hands, Vincent Marshall and Kerry Todd, the son of John Todd. The Vessel had set sail on 11th November from Newlyn, Cornwall, on a fishing expedition. While the precise cause of the Vessel capsizing is in dispute, it is clear that it was fishing with twin beams, and, at the moment it capsized, both sets of fishing gear were near to, or at, the water's surface. The Vessel capsized, flooded aft, and sank by the stern in the course of hauling her fishing gear.
- Thereafter, on 16th May 2000, the appellants, Moira Todd the widow of John Todd and mother of Kerry Todd, Rosemary Williams the partner and dependant of Robert Holmes, and Tracy Waters the widow of Vincent Marshall, began this action. They claim damages under the Fatal Accidents Act 1976 and the Law Reform (Miscellaneous Provisions) Act 1934. The respondents, the defendants to the action, are the then-owners of the Vessel, Godfrey Adams and Malcolm Chope.
- The appellants contend that the Vessel capsized and sank as a result, inter alia, of its failure to comply with Rule 16 of the Fishing Vessel (Safety Provisions) Rules 1975, SI 1975 No. 330 ("the 1975 Rules"). In this connection, the claimants' case is that the Vessel did not satisfy certain specified stability criteria set out in Rule 16 in "all foreseeable operating conditions". The respondents deny any breach of duty, whether under the 1975 Rules or otherwise. They contend, in the alternative, that they are entitled to limit their liability for any claim for loss of life by virtue of the provisions of section 185 of the Merchant Shipping Act 1995 ("the 1995 Act"), which incorporates Schedule 7. If that is correct, it would effectively limit the liability of the defendants to a sum a little under £150,000.
- On 6th December 2000, David Steel J ordered the trial of two preliminary issues. The first preliminary issue arises out of the appellants' claims based on breach of the 1975 Rules, and the respondents' contention (without prejudice to their argument that there was no infringement of the 1975 Rules) that such breach cannot in any event give rise to a civil liability. The second preliminary issue arises out of the respondents' contention (without prejudice to their denial of liability) that they are in any event entitled to limit any claim by virtue of the provisions of section 185 of the 1995 Act.
- The preliminary issues were framed in this way:
a. "Whether the… Rules… impose civil liability on persons in breach of the said Rules";
b. "Whether the defendants are entitled to limit their liability pursuant to section 185 of …the  Act."
- The preliminary issues came on for hearing before Aikens J, who handed down a judgment on 5th June 2001. On the first issue, he concluded that, even if the appellants established that the respondents were in breach of any of the 1975 Rules, that would nonetheless not of itself afford the appellants a cause of action against the respondents. As to the second issue, he concluded that the respondents could not rely on section 185(1) of the 1995 Act, because each of the deceased members of the crew was on board the Vessel under a "contract of service" governed by English Law. Because the points are of some importance and of some difficulty, the Judge (quite rightly in my view) permitted the appellants to appeal on the first issue and the respondents to appeal on the second issue. Although the two issues arise out of the same tragic event, are raised in the same set of proceedings, and concern the effect of the same Statute, the considerations they involve are entirely distinct. Accordingly, like the Judge, I propose to deal with them separately. I turn, then, to the first preliminary issue.
The first preliminary issue
The 1995 Act and the 1975 Rules
- The original power pursuant to which the 1975 Rules were made was contained in the Fishing Vessels (Safety Provisions) Act 1970 ("the 1970 Act") whose long title was:
"An Act To Make Further Provision For The Safety Of Fishing Vessels"
The 1970 Act was repealed by the 1995 Act, which, in Chapter II of Part V, substantially re-enacted, albeit with some modifications (immaterial for present purposes), the relevant provisions of the 1970 Act. Given that the differences between the relevant parts of the 1995 Act and the 1970 Act are immaterial for present purposes, I shall confine myself to the relevant provisions of the 1995 Act.
- Part V of the 1995 Act is headed "Fishing Vessels" and Chapter II is headed "Safety". The first section of that Chapter is section 121, which, so far as relevant, provides as follows:
"(1) The Secretary of State may make rules (in this Chapter referred to as "fishing vessel construction rules") prescribing requirements for the hull, equipment and machinery of United Kingdom fishing vessels of any description…
(2) The Secretary of State may exempt any fishing vessel or description of fishing vessel from any requirement of the fishing vessel construction rules.
(3) He may do so generally or for a specified time or with respect to a specified voyage or voyages in a specified area, and may do so subject to any specified conditions.
(4) A surveyor of ships may inspect any fishing vessel for the purpose of seeing that it complies with the fishing vessel construction rules.
(5) If –
(a) The fishing vessel construction rules are contravened with respect to any vessel; or
(b) A vessel is under sub-section (2) above, exempted from any requirement subject to a condition and the condition is not complied with;
the owner or master of the vessel shall be liable –
(i) on summary conviction, to a fine not exceeding the statutory maximum;
(ii) on conviction or indictment, to a fine."
- Section 122 of the 1995 Act empowers the Secretary of State to make "fishing vessel survey rules" for the "surveying and periodical inspection of… fishing vessels… for the purpose of ensuring their compliance with the requirements of the fishing vessel construction [rules]". Section 123(1) of the 1995 Act is in these terms:
"If the Secretary of State… is satisfied, on receipt of a declaration of survey in respect of a fishing vessel surveyed under the fishing vessel survey rules, that the vessel complies with such of the requirements of the fishing vessel construction [rules] as are or will be applicable to the vessel, then… the Secretary of State… shall, on the application of the owner, issue a certificate (… a "fishing vessel certificate") showing that the vessel complies with those requirements; and for this purpose any requirement from which the vessel has been exempted under section 121(2) or any other provision of this Act shall be deemed not to be applicable to it."
- Section 124(1) of the 1995 Act entitles the Secretary of State to " require a fishing vessel certificate which has expired or been cancelled to be delivered up as he directs". Section 124(3) is in these terms:
"The owner or skipper of a fishing vessel to whom a fishing vessel certificate is issued shall forthwith… cause a copy of it to be put up in some conspicuous place on board the vessel, so as to be legible to all persons on board, and to be kept so put up and legible while the certificate remains in force and the vessel is in use."
Section 124(2) and (4) provide that failure to comply respectively with the provisions of section 124(1) and (2), "without reasonable excuse" leads to a fine "on the summary conviction", "not exceeding level 2 on the standard scale".
- Section 125(1) of the 1995 Act provides:
"No fishing vessel required to be surveyed under the fishing vessel survey rules shall go to sea unless there are in force fishing vessel certificates showing that the vessel complies with such of the requirements of the fishing vessel construction [rules] as are applicable to the vessel."
Section 125(2) provides for a similar penalty as section 121(5) if a fishing vessel goes to sea in contravention of section 125(1). Section 125(3) requires a skipper of a fishing vessel to produce a certificate "on demand" to the Secretary of State, and provides further that "the fishing vessel may be detained until the certificate is so produced".
- I turn to the 1975 Rules. There are a total of 130 Rules which, together with 25 Schedules, run to 150 pages. Most of the Rules are contained in Part II, the "Fishing Vessel Construction Rules", which is itself divided into 11 parts, each of which relates to different aspects, the first three of which are "A-Hull", "B-Watertight Integrity" and "C-Freeboard and Stability". Rule 16 of the 1975 Rules, which is the Rule which the appellants allege the Vessel infringed, is in section C, and is in these terms:
"Every vessel of 12 metres in length and over to which these Rules apply shall in all operating conditions and circumstances set out in paragraphs 10 and 11 of Schedule 3 to these Rules and in all foreseeable operating conditions satisfy the following stability criteria after due correction for the free surface effects of liquids in tanks…"
There then follow four technical requirements of which the simplest is:
"(b) The righting lever (GZ) shall be at least 0.20 metres at an angle of heal equal to or greater than 30 degrees."
It is unnecessary to set out the other requirements for the purpose of the preliminary issue. I should, however, also mention that there is a proviso to Rule 16 to the effect that "for vessels engaged on single or twin boom fishing" the value of certain requirements, including that of the righting lever in (b), is to be "increased by 20%".
- The final section of Part II of the Rules is "K-Documentation to be Carried on Vessels", which requires certain information to be kept on board vessels which fall within the ambit of the 1975 Rules. Part III of the 1975 Rules is concerned with "Rules for Life-Saving Appliances" and Part IV provides for "Exceptional Provisions", and effectively permits non-compliance in certain specified respects provided that the result "is at least as effective as that required by these Rules". Part V of the 1975 Rules deals with surveys and certificates.
The legal principles
- The question of whether a failure on the part of the respondents, as owners of a vessel covered by the 1975 Rules, to comply with any of those rules could give rise to a civil liability on their part is an issue which primarily falls to be determined by reference to the 1995 Act. If the true effect of section 121 of the 1995 Act is that non-compliance with its provisions cannot give rise to a civil liability, then it would be impossible for any rules made thereunder to have the effect of creating such a liability; in so far as they purported to do so, any such rules would simply be ultra vires. On the other hand, if the true effect of section 121 of the 1995 Act was that the legislature intended there to be civil liability for non-compliance with the rules made thereunder, then, while it would, I believe, be possible for some or all of the rules made thereunder to exclude civil liability for their breach, one would expect, if that was the intention of the legislature, to see very clear words expressing that intention in the 1975 Rules themselves. There are no such clear words.
- Whether a statutory provision, such as section 121 of the 1995 Act, which imposes a Statutory duty on a person and provides for a criminal sanction on its breach, can also give rise to a liability for damages on the part of that person for breach of the duty, is a question which has come before the Court on a number of occasions, in connection with different Acts. The authorities to which we have been referred suggest that the following statement in Clerk & Lindsell on Torts (18th Edition, 2000) at paragraph 11-02 is, regrettably, correct:
"Unfortunately, most legislation fails to give any express guidance as to whether an action for damages is available for its breach, and then the courts have to decide what Parliament intended. Determining Parliament's intention when it has pointedly declined to express one is something of a haphazard process. The courts look to the construction of a statute, relying upon a number of "presumptions" for guidance, but in practice there are so many conflicting presumptions, with variable weightings, that it can be extremely difficult to predict how the courts will respond to a particular statute."
- It appears to me that the question of whether, by imposing a duty, the legislature intended the breach to give rise to a civil remedy must ultimately depend upon the construction of the particular statutory provision, bearing in mind the language and purpose of the provision, and all other relevant circumstances. Accordingly, as with any question of statutory (or indeed contractual) interpretation, it can be difficult, even dangerous, to attempt to lay down any rules of general application. Of course, cases in which a similar problem has arisen, albeit in relation to a different statutory provision, may provide assistance, particularly so far as the reasoning is concerned. However, in each case the court has to make up its mind by reference to the relevant material available in relation to the particular statutory provision under consideration.
- That is not to say that there can be no general guidance, but it is likely to be limited. Apart from obvious cases (for instance where the legislation, unusually and helpfully, specifically states whether it is intended that the breach of the statutory duty should give rise to civil liability, as for instance in section 47 of the Health and Safety at Work etc. Act 1974) some general guidance is indeed available. It is summarised in the speech of Lord Browne-Wilkinson in X (Minors) –v- Bedfordshire County Council  2 AC 633 at 731C-E:
"The principles applicable in determining whether [a] statutory cause of action exists are now well established, although the application of those principles in any particular case remains difficult. The basic proposition is that in the ordinary case a breach of statutory duty does not, by itself, give rise to any private law cause of action. However a private law cause of action will arise if it can be shown, as a matter of construction of a statute, that the statutory duty was imposed for the protection of a limited class of the public and that Parliament intended to confer on members of that class a private right of action for breach of a duty" (emphasis added).
The last sentence identifies two hurdles for the appellants: (a) identification and membership of a class to be benefited, and (b) an intention to confer on that class a right of action. Lord Browne-Wilkinson went on to say this:
"If the statute provides no other remedy for its breach and the Parliamentary intention to protect a limited class is shown, that indicates that there may be a private right of action… If the statute does provide some other means of enforcing the duty that will normally indicate that the statutory right was intended to be enforceable by those means and not by private right of action… However, the mere existence of some other statutory remedy is not necessarily decisive. It is still possible to show that on the true construction of the statute the protected class was intended by Parliament to have a private remedy. Thus the specific duties imposed on employers in relation to factory premises are enforceable by an action for damages, notwithstanding the imposition by the statute of criminal penalties for any breach: see Groves –v- Wimborne (Lord)  2 QB 402."
- This observation, itself of the highest authority, is supported by observations of equal authority (see e.g. per Lord Diplock in Lonrho Limited –v- Shell Petroleum Co. Limited (No. 2)  AC 173 at 185B-E, R –v- Deputy Governor of Parkhurst Prison ex p. Hague  1 AC 58 at 170C to 171A per Lord Jauncey of Tullichettle, and Phelps –v- Hillingdon London Borough Council  2 AC 619 at 652B-E per Lord Slynn of Hadley.
- Even some of this limited guidance is, however, open to question. In Phillips –v- Britannia Hygienic Laundry Company Limited  2 KB 832 at 841, Atkin LJ said that in his view:
"[T]he question is not to be solved by considering whether or not the person aggrieved can bring himself within some special class of the community or whether he is some designated individual. The duty may be of such paramount importance that it is owed to all the public. It will be strange if a less important duty, which is owed to a section of the public, may be enforced by an action, while a more important duty owed to the public cannot. The right of action does not depend on whether a statutory commandment or prohibition is pronounced for the benefit of the public or for the benefit of a class."
- I do not think it appropriate for this Court to follow the approach of Atkin LJ, albeit that it appears to me to have considerable force. The principles laid down by Lord Browne-Wilkinson have effectively been adopted by the House of Lords in four recent cases, and therefore must, I think, be regarded as binding on this Court, unless and until the House of Lords holds otherwise. In any event, I think that it is unnecessary to consider whether the appellants need to establish that the deceased were within a specific class for whose benefit the statutory duty was created, because it seems to me that the appellants satisfy that requirement in the present case. I agree with Miss Blackburn QC (who appears for the appellants with Mr Davey): just as the Factory Acts were enacted for the benefit and protection of those working in factories, so were the "Safety" provisions in Chapter II of Part V of the 1995 Act enacted for the protection of those who go to sea in the fishing vessels covered by those statutory provisions.
- Of course, it can be said that the Safety provisions of the 1995 Act, while of particular benefit to those at sea on fishing vessels, are nonetheless in the general public interest, both because it is in the public interest that people at sea are protected, and for the narrower reason that lack of safety in fishing vessels may discourage those who would otherwise go to sea from providing consumers with fish. However, the same line of reasoning would result in the conclusion that the Factory Acts could be said not to be solely for the benefit of a specific class, namely those working in factories. Indeed, it seems to me that such reasoning would result in the conclusion that there was no, or very little, legislation which could be said to be solely for the benefit of a particular class.
- I turn, then, to the central question on this first issue, namely, whether, as a matter of construction, it was the intention of the legislature to confer on persons sailing on fishing vessels the right to make a civil claim for any loss suffered as a result of a breach of any rules made pursuant to section 121(1) of the 1995 Act. Given that section 121 is silent on the issue, one has to look for indications or clues as to the intention of the legislature in this connection. In my judgment, there are a number of reasons for thinking that the legislature did not intend that a breach of any of the rules promulgated pursuant to section 121(1) of the 1995 Act should give rise to a cause of action in favour of a person who suffers as a result of the breach.
- First, the sanction for contravention of any such rules is specifically provided, namely through the medium of criminal penalties in section 121(5). As Lord Browne-Wilkinson made clear in X –v- Bedfordshire at  2 AC 731D-E, the existence of a criminal sanction for breach of the statutory duty in question is an indication, but not a definitive indication, that the legislature did not intend a civil remedy to be available for the breach.
- Secondly, the obligation in section 121(1) is not expressed as being that of any specific person. The statutory requirement is that a fishing vessel of a particular nature should satisfy the rules concerned; it is only when one gets to section 121(5), which contains the criminal sanction, that "the owner or master of the vessel" is identified as the person who is to be criminally liable for a breach of those rules. In other words, the statutory duty which the appellants seek to enforce in the present case is not a duty which the legislature has imposed in terms on any particular person. All the legislature has done is to state that, where there is an infringement of the rules concerned, the sanction expressly provided for, namely a criminal liability, is to be against the owner or master. In my judgment, this would not, of itself, render it impossible for the court to conclude, in an appropriate case, that there should also be a civil liability on those against whom the legislature has prescribed a criminal liability. However, I think that it renders it more difficult to maintain the argument that specific persons could be civilly liable.
- Thirdly, the fact that section 121(2) of the 1995 Act gives the Secretary of State a power (of a very wide and flexible nature as is clear from the next sub-section) to exempt vessels from the ambit of any rules, tends to support the proposition that there was no intention to impose a civil liability for breach of any of the rules. As Mr Nolan points out on behalf of the respondents, it would seem surprising if two identical vessels had accidents caused by the same defect, but that in one case there was no cause of action under the 1975 Rules, because the vessel had been exempted from the relevant part of the rules, and in the other case there was a virtually unanswerable cause of action, because it had not been so exempted. The Secretary of State might think it right, for instance, to relax a rule in relation to fishing vessels based in harbours in a specific area, for economic or (in the wider sense of the word) political reasons, and it would be a little surprising if the civil liability of the owner or master could depend on that sort of factor.
- Fourthly, the certification provisions set out in sections 122 to 125 of the 1995 Act appear to me to lie somewhat uneasily with the notion that a breach of the rules promulgated pursuant to section 121 of the 1995 Act could lead to civil liability. The point is rather well illustrated by the facts of the present case, as I understand them. The appellants accept that, at the date of the tragedy, the Vessel had a certificate which, at any rate on its face, appeared to be a valid certificate for the purposes of section 123(1) of the 1995 Act. The appellants, however, contend that, in issuing the certificate (and indeed in issuing many certificates under that section and the relevant provisions of the 1975 Rules) the Secretary of State, or the surveyor concerned, have wrongly interpreted Rule 16, and in particular have not given proper effect to the words "in all foreseeable operating conditions" in that Rule. Whether or not the Judge was right in characterising the certification procedure as a form of enforcement, I agree with him that that procedure calls into question the notion that breach of the rules made pursuant to section 121 can give rise to a civil cause of action. As the present case shows, it would mean that, even though the Secretary of State and his surveyor considered that a particular vessel satisfied fishing vessel construction rules, and had issued a certificate to that effect, the master or owner could nonetheless be liable for damages for breach of those very Rules. Particularly bearing in mind the rather technical nature of some of those Rules (and Rule 16 is a particularly good example) that would seem a little surprising.
- It is true that, as Miss Blackburn points out, even if a certificate is issued pursuant to section 123 in respect of a vessel, the owner or skipper of that vessel could nonetheless be convicted for failing to comply with the fishing vessel construction rules, by virtue of section 121(1) and (5). However, save in a case where the skipper or owner had been responsible for misleading the surveyor who issued the certificate, or because of some other exceptional fact, it seems to me that the prosecution of an owner or skipper for the breach of the 1975 Rules in circumstances where the vessel had been issued with a certificate (whose effect would be to say that a properly qualified surveyor on behalf of the Secretary of State was satisfied that the vessel complied with the fishing vessel construction rules) would almost certainly not be undertaken in the first place, and, if it were, the owner or skipper would be most unlikely to receive any penalty. On the other hand, if he could be liable in civil proceedings in such a case, as the appellants contend that he could be, the civil court would simply have no discretion.
- In this context, I think it is also relevant to bear in mind that, if the appellants' argument is correct, then, in light of the fact that criminal liability under section 121(5) of the 1995 Act can attach to the "master" as well as to the "owner", it would seem to follow inescapably that the skipper of a vessel which in some way breaches the fishing vessel construction rules could be liable to anyone on board who suffers as a result, even though the vessel has been validly certified pursuant to section 123. I consider that it is unlikely that that could have been the intention of the legislature.
- Finally, when enacting section 121(1) of the 1995 Act, the legislature must have envisaged that the Secretary of State would promulgate rules of a fairly detailed and comprehensive nature. Indeed, I consider that that assumption is of particular force in light of the fact that the 1975 Rules, promulgated under the 1970 Act, had been in existence for some 20 years, and contained a large number of detailed provisions, at the time of the passing of the 1995 Act. In this connection, I think that observations of Atkin LJ in another passage in his judgment in Philips at  2 KB 842 are in point. He was considering whether breach of the Provisions of the Motor Cars (Use and Construction) Order 1904 made under section 6 of the Locomotives on Highways Act 1896, which, under section 7 of the 1896 Act could lead to criminal prosecution, could also found a claim for civil liability. He said this:
"They [sc. the provisions of the 1904 Order] impose obligations of various kinds, some are concerned more with the maintenance of the highway than with the safety of the passengers; and they are of varying degrees of importance; yet for breach of any regulation a fine not exceeding 10l. is the penalty. It is not likely that the Legislature, in empowering a Department to make regulations for use and construction of motor cars, permitted the Department to impose new duties in favour of individuals and new causes of action for breach of them in addition to the obligations already well provided for and regulated by the common law of those who bring vehicles upon highways. In particular it is not likely that the Legislature intended by these means to impose on the owners of vehicles an absolute obligation to have them roadworthy in all events even in the absence of negligence."
That passage has added force in that the last two sentences were cited with approval and followed by the Privy Council in Tan Chye Choo –v- Chong Kew Moi  1 WLR 147 at 154.
- Much of the force of those observations applies in the present case, although it is fair to say that there is no equivalent in the 1975 Rules to "obligations… concerned more with the maintenance of the highway" to be found in the 1904 Order. The force of Atkin LJ's observations in the passage I have quoted is both undermined and supported by differing views in Hague  1 AC 58; at 160B-C, Lord Bridge appears to have taken a somewhat different view, but at 171C-G, Lord Jauncey seems to have taken the same sort of view. Lords Ackner, Goff of Chievley and Lowry each gave speeches which do not bear on the point, and they all agreed with both Lord Bridge and Lord Jauncey.
- While none of the arguments I have identified as supporting the respondents' case on the first issue can be characterised as conclusive, I have reached the conclusion that, taken together, they point firmly in favour of the contention that a breach of the rules issued pursuant to section 121 of the 1995 Act cannot of itself form the basis of a civil claim by a person who has suffered damage as a result of such a breach.
- Having said that, I accept that there are arguments the other way (which is scarcely surprising in this often difficult and controversial area of law). In particular, the similarity of the purposes of Chapter II of Part V of the 1995 Act and the Factory Acts is of obvious force. The Factory Acts provided for safety precautions in factories failing which an employer was liable to criminal prosecution and a fine; the purpose of those Acts was to protect workers in factories, and it is well established that breach of the provisions can found a claim against the employer for a civil claim in damages, as Lord Browne-Wilkinson said in X –v- Bedfordshire at  2 AC 731G. By parity of reasoning, given that the purpose of the 1975 Rules is to protect workers on fishing vessels and those who died in the present case were within that class, it is argued that the fact that the relevant statutory provision, section 121 of the 1995 Act, only provides for criminal penalty should not prevent their representatives from founding a claim on a breach of the Rules. The appellants argue that that conclusion is reinforced by observations of this Court in Reeman –v- Department of Transport  2 Lloyd's Rep 648 as to the purpose of the 1975 Rules.
- So far as the appellants' reliance on Groves  2 QB 402 is concerned, it plainly gives support, if it were necessary, for the appellants in getting over the first hurdle, namely to establish that the legislation in question was enacted to protect a class of persons, and that the deceased fell within the class. However, the decision can only be of limited assistance at best, on the second hurdle which the appellants have to cross, namely, to show that, on its true construction, the legislation manifests an intention to enable members of the class to bring a civil suit for damage suffered as a result of the breach. It being a matter of construction, each case must inevitably turn on its own particular features, as I have already mentioned.
- As appears from the judgment of AL Smith LJ in Groves  2 QB 402, there are a number of differences between section 121 of the 1995 Act and the statutory provision specifically under consideration in that case, namely section 5 of the Factory and Workshops Act 1878. First, in that case, the legislature had actually spelt out the extent of the duty in legislation (namely section 6(2) of the Factory and Workshops Act 1891, as set out at  2 QB 406), and it was a short and simple duty. That is to be contrasted with the multifarious and sometimes complex duties set out in subordinate legislation, which has not been specifically considered by the legislature. Secondly, there was no question of any power to exempt a particular factory or type of factory from the statutory obligation, as there is here in relation to fishing vessels. Thirdly, there was no certification procedure under the Factory Acts. Fourthly, although it may be said to have cut both ways, the fact that there was a provision for the fine or part of the fine levied on a convicted employer to be paid over to the injured person or his family (as described at  2 QB 408) can be said to support the view that the purpose of the legislation in that case was indeed to confer rights, or at least potential rights, on a class of person including the plaintiff in that case. Fifthly, unlike the present case, the criminal proceedings envisaged in that case were more flexible: as explained at  2 QB 408 to 409, the employer could escape liability if he could show that another employee was responsible for the breach, and that employee could then be prosecuted. In other words, although the offence was absolute, the person criminally liable would depend on the circumstances, unlike here. Sixthly, at the time that Groves  2 QB 402 was decided, there was a defence of common employment, explained and discussed at  2 QB 409 to 410, and the availability of that somewhat unattractive defence to a claim for damages for negligence against the employer prevented many otherwise valid claims succeeding. The effect of the decision of the Court of Appeal was to provide what amounted to a way around the defence of common employment, where a breach of statutory duty could be established.
- The thrust of the judgment of Rigby LJ in Groves at  2 QB 414 to 415 appears to have been based on the potential lack of correlation between the gravity of the breach of the Factory Acts and the damage caused as a result which could lead to a fine which in no way reflected the gravity of the damage done to the employee. This is because the maximum prescribed fine might be far less than the appropriate level of damages, and because a very grave breach might lead to a very small injury (and vice versa). It seems to me that those observations do not apply with much force in this case: they were largely based on the fact, which I have already mentioned, that the Factory Acts entitled all or part of the fine exacted from the employer to be paid over to the injured employee or his family. Furthermore, in the present case, section 121(5)(ii) of the 1995 Act imposes no upper limit on the fine for breach of its provisions. The approach of Vaughan Williams LJ in Groves at  2 QB 415 to 419 seems to have been very much in accordance with the modern approach to questions of this sort as stated by Lord Browne-Wilkinson in X –v- Bedfordshire at  2 AC 731C-G.
- Reeman  Lloyds Rep 648 was a case concerned with the question of whether negligence on the part of a surveyor carrying out a survey under the provisions of the 1975 Rules, and under the equivalent provisions under the 1970 Act of sections 122 and 123 of the 1995 Act, could justify a claim for economic loss by the owners of the vessel against the Secretary of State and the surveyor. In light of the issue facing the Court of Appeal in that case, any observations are unlikely to be of more than persuasive value. It appears to me that the judgments of Lord Bingham of Cornhill LCJ, and Peter Gibson and Phillips LJJ do no more, for the purpose of this case, than to emphasise that the purpose of the 1970 Act, and therefore of Chapter II of Part V of the 1995 Act, is to protect a class of persons of whom each deceased crew member in the present case were members, a point which I would accept in any event. The point is perhaps made most graphically in the judgment of Lord Bingham at  2 Lloyds Rep 685 where he said this:
"The purpose of the certificate (and the tests which preceded or should have preceded, it) was to safeguard the physical safety of the vessel and her crew; it was not directed in any way to the market value of the vessel."
- Accordingly, it appears to me that, like Groves  2 QB 402, the assistance to the appellants afforded by Reeman  2 Lloyds Rep 648 is in helping them over the first hurdle, namely to establish that the purpose of the relevant legislation was to protect a certain class of persons and that the deceased fell within it. However, for the reasons I have given, neither case appears to provide much assistance in relation to the second hurdle facing the appellants, namely, whether, in light of the words used by the legislature and all other relevant circumstances, one can fairly conclude that it was the purpose of the legislature to give a cause of action to a person within that class who is injured by a breach of the duty to recover damages for the breach of that duty.
- In these circumstances, I would dismiss the appellants' appeal against the Judge's determination on the first issue.
The second issue
- Section 185 of the 1995 Act is headed "Limitation of Liability for Maritime Claims", and sub-section (1) provides that the provisions of the Convention on Limitation of Liability for Maritime Claims 1976 ("the Convention") should "have the force of law in the United Kingdom". The Convention is set out in full in Part 1 of Schedule 7 to the 1995 Act. Article 2 of the Convention deals with "claims subject to limitation", which include "claims in respect of loss of life… occurring on board or in direct connection with the operation of the ship", and it is common ground that this would apply to the present claims.
- Article 3 of the Convention is concerned with "claims exempted from limitation" which, through paragraph (e), provides that the Convention should not apply to:
"Claims by servants of the ship owner… whose duties are connected with the ship… including claims of their heirs, dependants or other persons entitled to make such claims, if under the law governing the contract of service between the ship owner… and such servants the ship owner… is not entitled to limit his liability in respect of such claims… "
The provisions of the Convention then set out provisions relating to the "Limits of Liability", the terms of which are not germane to the present issue.
- Section 185(4) of the 1995 Act states that the provisions of the Convention:
"Shall not apply to any liability in respect of loss of life or personal injury caused to… a person who is on board the ship in question or employed in connection with that ship… if –
(a) he is so on board or employed under a contract of service governed by the law of any part of the United Kingdom;
- The issue upon which the question of applicability of the Convention to the present claims depends is whether each of the deceased was "employed under a contract of service" on the vessel when the tragedy occurred. The Judge decided that each of the deceased was "employed under a contract of service", and accordingly determined, in favour of the appellants, that, if the respondents were liable to the appellants, they were not entitled to rely on the provisions of the Convention. There have been a fair number of cases where the courts have had to decide whether a person is employed under a contract of service. Each such case inevitably turns on its own particular facts, but a degree of general guidance may be obtained from some judicial observations and analysis.
- In a passage cited with approval by the Privy Council in Lee Ting Sang –v- Chung Chi-Keung  2 AC 374 at 382D-G, Cooke J said this:
"The fundamental test to be applied is this: 'is the person who has engaged himself to perform these services performing them as a person in business on his own account?'. If the answer to that question is 'yes,' then the contract is a contract for services. If the answer is 'no,' then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in performance of his task" – see Market Investigations Limited –v- Minister of Social Security  2 QB 173 at 184 to 185.
- It is also helpful to refer to what was said by Mackenna J in Ready Mixed Concrete (South East) Limited –v- Minister of Pensions  2 QB 497 at 515:
"A contract of service exists if these three conditions are fulfilled. (i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with it being a contract of service."
This passage was recently cited with approval by this Court in Montgomery -v- Johnson Underwood Limited  ICR 819 at 824B-C
- Although the Judge heard some of the witnesses cross examined, it appears to me that hardly any of the relevant facts relating to the basis upon which the members of the crew of the Vessel were engaged were in dispute. The crew of the Vessel were all share fishermen, which, as the Judge observed, "is a well recognised status in the fishing industry, both in South West England and in Scotland". There is nothing to suggest that the basis upon which the deceased were engaged on the Vessel in this case differed from the arrangements under which share fishermen generally work. On the contrary, some of the evidence, and some of the Judge's conclusions, appear to have been based, at least in part, on the common practice relating to share fishermen, at least in or around Newlyn.
- So far as the selection of the members of the crew is concerned, the position was as follows. In October 1995, the respondent owners appointed Mr Holmes as Skipper (having been the Mate since the beginning of that year). Mr Todd joined as Mate in January 1996, and the other crew members joined in 1997. Mr Holmes, as Skipper, selected members of the crew, although he would liaise with the respondents in that connection. If either Mr Holmes or the respondents had wished to dispense with a member of the crew, then he would have ceased to work on the Vessel. Members of the crew sometimes went on fishing expeditions on other vessels. A member of the crew did not regard himself as obliged to go on any particular voyage, but in practice he almost always did so, not least because, if he did not go on a voyage without a good reason, he would no longer have been permitted to be a member of the crew. If, as happened once or twice, a crew member was unable or unwilling to go on a particular voyage, he could put someone forward in his place, and, provided that person was acceptable to the Skipper and other members of the crew, he would go on the relevant voyage.
- As to the formalities, there were no written contracts of engagement in relation to any of the crew. Mr Chope, one of the respondent owners, supplied the crew members with forms, which described them as "employed", albeit that the respondents had inherited those forms from the previous owner of the Vessel. In his cross-examination, Mr Chope accepted that there was a "pecking order", in that he was "above" the Skipper, and (by implication) the Skipper was "above" the other crew members.
- None of the crew received any wage or salary, and the financial arrangements were as follows. After each trip, the catch was sold at auction by W Stevenson & Son ("Stevensons"), the owners of a large fishing fleet. The proceeds of the sale were divided by Stevensons in the following way. Out of the gross proceeds of each trip, 5% went to the respondents, 4% to Stevensons by way of commission, 2% to Newlyn Harbour for landing charges, and a variable sum went to meet the cost of ice, fuel and other similar expenses. The balance was divided as to 40% for the crew and 60% for the owners. The Skipper, rather than the owners, decided how the 40% was to be divided between himself and the other three members of the crew. Indeed, the owners only discovered how the division had been effected between crew members, once they received the documents from Stevensons. Each crew member got his food for the voyage from Stevensons, who would deduct the cost from his share of the 40%.
- If a voyage proved abortive, because, for instance, the engine broke down and the Vessel had to return to harbour for repair, the cost of the abortive voyage (being, I think, mainly the cost of fuel and ice) would be added to the total expenditure of the subsequent successful voyage and deducted from the proceeds as part of the initial deductions. It appears that, although it did not happen, if one of the crew members had left after the abortive voyage and before the successful voyage, he would not have been expected to pay up his notional share of the cost of the fuel and ice on the abortive voyage, Equally, although it also never happened, if the Vessel had had a loss making voyage (because no fish could be found, or the value of the haul was insufficient to cover the overheads before the 60/40 split) the evidence indicated that members of the crew would not have been liable for any share of the loss suffered by the respondent owners, in particular the cost of the ice and fuel.
- Each of the deceased was treated by the Inland Revenue as self employed and taxed on that basis. Further, they each were responsible for their own National Insurance contributions, and had no entitlement to sick pay, paid holidays, redundancy payment, or compensation for unfair dismissal.
- So far as the actual operation of the Vessel was concerned, Mr Holmes, as Skipper, was responsible for the day to day management, the use of the equipment, and the reporting of any defects on return to port. He would also ensure that the fishing gear was ready for the next trip. Although the ultimate decision, as to where and when the Vessel went to sea, and for how long they would fish, was that of the Skipper, the decision on such issues would normally be discussed and agreed between all four members of the crew.
- As to the provision of equipment, members of the crew provided their own oilskins, gloves, knives, and bedding. In addition to the Vessel itself, the owners provided the fishing gear, safety equipment and items such as grease and materials for repairing the fishing gear. The Vessel was painted once a year at the expense of the respondents, usually by members of the crew who were paid at an hourly rate by the respondents.
- While the Judge found the issue a difficult one to resolve, he ultimately concluded that each of the deceased was "employed under a contract of service". In reaching that conclusion, he accepted, plainly rightly, that there were factors pointing the other way. In particular, the fact that the crew were remunerated by reference to a percentage of the proceeds of sale of the catch, and ran the risk of receiving no remuneration on a particular trip, that the crew provided some personal gear, and that the crew, albeit led by the Skipper, would decide how long to fish and where to fish. However, he concluded that these factors were outweighed by the fact that the respondents had "provided nearly all the equipment for the business of fishing" including the Vessel, that the method of fishing was dictated by the Vessel and the gear, that the upkeep and repair of which was paid for by the respondents, that a member of the crew's remuneration depended relatively little on his own management, and that the crew "did not have to meet any losses incurred".
The proper approach on this appeal
- It appears clear from the authorities (including those to which reference has already been made) that the question, of whether a particular relationship is a "contract of service" or not, can present difficulties. Obviously, it will depend upon the facts, and there will frequently be cases with a fair number of factors to be weighed up, with some factors pointing one way and some pointing the other. In this case, the Judge considered the case law, identified the various factors, and came to a conclusion. In those circumstances, apart from arguing that the Judge was right on this issue, the appellants contend that, in any event, this Court should not interfere with his decision. In support of that contention, the appellants refer to a number of authorities.
- In Lee Ting at  2 AC 384E to 385C, the Privy Council said this:
"Whether or not a person is employed under a contract of service is often said in the authorities to be a mixed question of fact and law. Exceptionally, if the relationship is dependant solely upon the true construction of a written document it is regarded as a question of law… But where, as in the present case, the relationship has to be determined by an investigation and evaluation of the factual circumstances in which the work is to be performed, it must now be taken to be firmly established that the question of whether or not the work was performed in the capacity of an employee or as an independent contractor is to be regarded by an appellate court as a question of fact to be determined by the trial court. …[N]o doubt because of the difficulty of devising a conclusive test to resolve the question and the threat of the appellate courts being crushed by the weight of appeals if the many borderline cases were considered to be questions of law, it was held in a series of decisions in the Court of Appeal and in the House of Lords under the… Workmen's' compensation Acts 1906 and 1925 that a finding by a County Court Judge that a workman was, or was not, employed under a contract of service was a question of fact with which an appellate court could only interfere if there was no evidence to support his finding."
That was stated in the context of appeals from tribunals, whose decisions could only be challenged on the ground of error of law.
- I should also refer to a more recent decision of the House of Lords, on a not dissimilar issue. In Carmichael –v- National Power plc  1 WLR 2042, the issue was whether persons employed by a letter hiring them "on a casual as required basis" were employees under contracts of employment. Having identified and explained the principle that the effect and nature of a contract, including a contract of employment, was a question of law if the contract was in writing, Lord Hoffmann, agreeing with Lord Irvine of Lairg LC who gave the leading speech, said this at  1 WLR 2049B-C:
"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 of the terms of their agreement is also a question of fact."
- It is also worth referring to the view of this Court as expressed in Clifford –v- Union of Democratic Mineworkers  IRLR 518 at 520, where, after suggesting that whether one person employed another was a mixed question of fact and law, Mann LJ continued:
"This description [sc. a mixed question on fact and law] does not, however, in my judgment mask the reality that the answer to the question is determined by the determination and evaluation of the relevant materials. This is the task of the industrial tribunal and is not for either the appeal tribunal or this Court. Neither can interfere with the resolution of an issue of fact unless the resolution contains an explicit or implicit misdirection in law… In the present case therefore the question is not whether the industrial tribunal were "wrong" but whether their conclusion betrays a self-misdirection."
- In light of these authorities, the appellant's primary contention is that, as the question raised by the second issue is whether the deceased were employed under a contract of service, the Judge's decision on the point was a determination of fact with which this Court should be very slow indeed to interfere. Despite what was said in Lee Ting at  2 AC 384E to 385C, I cannot accept that a Judge's decision as to whether a person is employed under a contract of service can fairly be described as a determination of primary fact. In this context, I note that Lord Donaldson MR said, in O'Kelly –v- Trusthouse Forte plc  QB 90 at 124A, that the "test to be applied in identifying whether a contract is one of employment or for services is a pure question of law and so is its application to the facts".
- Where, as here, there was no written contract between the parties, nor indeed any evidence as to the words used by the parties to create their contract, the basis upon which they actually conducted their relationship may frequently involve issues of primary fact. Indeed, the first stage of an enquiry as to whether there is a contract of service (where there is no agreement containing all the terms) must almost always be to identify all the relevant incidents of the relationship. That will always involve (albeit not necessarily exclusively) findings of primary fact, in respect of which an appellate court would be very slow to interfere. In this case, as already indicated, it does not seem to me that any great problem arises in that connection, because there was no real dispute as to the factual incidents of the relationship.
- Having determined the factual incidents of the relationship, the first instance tribunal has to proceed to the second stage, which involves deciding whether all those facts, taken together, lead to the conclusion that there was a contract of service. Whether one characterises that conclusion as an inference, as a conclusion of law, or (which I doubt) as a finding of secondary fact, it seems to me that the essential point is that it would be a conclusion arrived at by a proper evaluation of the effect of the various factual incidents of the relationship. In principle, it is plainly easier for an appellate court to be persuaded to interfere with a conclusion reached by the tribunal at this second stage, than it is in relation to its decision at the first stage. That is because, in relation to the second stage, an appellate court is not being asked to interfere with a tribunal's primary findings of fact.
- Nonetheless, where there is a challenge to a first instance tribunal's conclusion at the second stage, namely, whether or not there is a contract of service, I do not consider that an appellate court faces a black or white choice, as it would on a point of law such as an issue of contractual or Statutory interpretation, between holding that the tribunal was right or wrong. The first instance decision may fall within a grey area, a sort of margin of appreciation, where an appellate court may, indeed should, conclude that the tribunal reached a conclusion which it was entitled to reach and with which the appellate court should not interfere. After all, the exercise on which the tribunal is engaged in a case such as this is weighing up various factors, some of which point one way and some of which point the other, and reaching a conclusion as to the side on which the balance ultimately comes down. In my judgment, in such a case, an appellate court should not interfere unless the first instance tribunal has misdirected itself on the law (either expressly or impliedly), has taken into account a factor which it ought not to have taken into account, has failed to take into account a factor which it ought to have taken into account, or has reached a conclusion which, in light of the primary facts, it could not properly have reached.
- I derive support for this view from the approval by Lord Hoffmann in Designers Guild Limited –v- Russell Williams (Textiles) Limited  FSR 113 at 122, of what Buxton LJ said in Norowzian –v- Arks (No. 2)  FSR 363 at 370:
"[W]here it is not suggested that the Judge has made an error of principle, a party should not come to the Court of Appeal simply in the hope that the impression formed by the Judges in this Court… will be different from that of the trial Judge. This in my view is a particularly strong example of the general principle stated by Robert Walker LJ…"
- In that passage, Buxton LJ was referring to what Robert Walker LJ said in Pro Sieben Media AG –v- Carlton UK Television Ltd  1WLR 605 at 612 to 613, namely:
"There is another general point which should be mentioned, that is the approach which this Court should take on appeal against a judge's ruling, after a full trial, on an issue of fair dealing. It is an issue on which the judge had come to a judgmental conclusion after taking into account a number of factors. In such a case the correct approach for an appellate tribunal was described as follows by Hoffmann LJ in re Grayan Building Services Limited  Ch. 241, 254…,
"The Judge is deciding a question of mixed fact and law in that he is applying the standard laid down by the courts (-in that case- conduct appropriate to a person fit to be a director) to the facts of the case. It is in principle no different from the decision as to whether someone has been negligent or whether a patented invention was obvious: see Benmax –v- Austin Motor Co. Limited  AC 370. On the other hand, the standards applied by the law in different contexts vary a great deal in precision and generally speaking, the vaguer the standard and the greater the number of factors which the court has to weigh up in deciding whether or not the standards have been met, the more reluctant an appellate court will be to interfere with the trial judge's decision."
… That is the right approach on this appeal. The Judge's conclusions, especially on fair dealing, should not be disturbed unless they proceeded from some error of principle or are clearly unsustainable."
- In my judgment, those observations apply to this appeal, where, in circumstances where the findings on the primary facts are (unsurprisingly) not challenged, a "number of factors" had to be "weigh[ed] up" by the Judge, in order to decide whether or not a particular arrangement constituted a contract of service. Indeed, this is supported in relation to the specific issue of whether there is a contract of service by what Lord Donaldson MR said in O'Kelly at  QB 124A-B:
"[I]t is for the tribunal of fact not only to find those facts but to assess them qualitatively and within limits, which are indefinable and abstract….."
- The respondents' contention that we should reverse the Judge's conclusion that the deceased crew members were employed under a contract of service involves four lines of argument. First, that the Judge arrived at the wrong answer because he asked himself the wrong question. Secondly, that, in light of all the facts, the Judge could only properly have reached one conclusion, namely that the members of the crew were not employed under a contract of service. Thirdly, that the Judge was wrong in his treatment of some of the factors which assisted the argument that there were no contracts of service. Fourthly, that the Judge gave insufficient weight to factors favouring such a conclusion, and too much weight to the factors which called that conclusion into question.
- As to the first contention, the question which the Judge asked himself, wrongly as the respondents contend, was this:
"Does the evidence show that each crew member was on board the Vessel for each fishing trip under a contract with the owners whereby he would provide his services for that trip, under the ultimate control and direction of the ship owners and where the ship owners provide the bulk of the equipment the investment and the management of the business of fishing?"
- In my view, particularly when one reads that question in the context of the part of the judgment in which it is found, headed "Analysis and Conclusion", it is not fairly open to criticism. It follows a passage in which the Judge had identified the main factors which he considered pointed each way, had observed that "the relevant factors are very evenly balanced in this case", and had referred again to the provisions of section 185(4)(a) of the 1995 Act. In my judgment, what the Judge was doing was asking himself the right fundamental question, albeit in an arguably slightly loaded way, because of the reference to the ship owners having "the ultimate control and direction" and providing "the bulk of the equipment the investment and the management". However, those were factors which he was entitled, indeed obliged, to take into account, when considering the issue he had to determine. Particularly when read in the context of his immediately preceding summary of the major relevant factors, I do not see how it could be realistically be said that he had ignored all other factors. The worst that can be said about the question is that (as I have mentioned) the Judge may slightly have loaded it. However, reading the question fairly and in its context, I consider it unexceptionable. The Judge referred to the relevant principles, appreciated that he should consider the facts of this particular case, did so, and came to a conclusion. Accordingly, I do not accept that the first attack on the Judge's approach to the issue can succeed.
- So far as the respondents' fourth line of attack against the Judge's conclusion on the second issue is concerned, it seems to me that it must fail, if the second and third lines fail. The second and third attacks involve contending either that the Judge could only have properly reached the decision that there were no contracts of service on the primary facts he found, or that, because the Judge wrongly took, or wrongly failed to take, a particular factor into account, this Court can and should reconsider the issue, and should conclude that there were no contracts of service. As I have said, those appear to me to be legitimate arguments to raise on this appeal, in principle. The respondents' fourth attack adds nothing to their second and third lines of attack, if they establish the Judge could not have reached the conclusion that he did, or wrongly took, or failed to take, something into account. If the respondents do not make good both or either of those attacks, then the respondents would be merely asking this Court to carry out the balancing exercise which, as I see it, is the function of the first instance Judge, rather than of this Court. In that connection, I refer back to the various observations of high authority cited in the preceding section of this part of the judgment. Accordingly, it appears to me that the respondents can only succeed in their appeal on this second, issue if they can successfully attack the Judge's conclusion on the second or third basis, which I shall consider together.
- I turn, then, to consider whether the Judge was entitled to conclude that each of the deceased members of the crew of the Vessel was "employed under a contract of service". I must confess to having initially thought that, although I would have arrived at a different result, the view reached by the Judge was one that he was entitled to reach. However, I have come to the conclusion that, on the evidence, there was only one correct view, and that was that the members of the crew of the Vessel were not "employed under a contract of service" at the time of the tragedy. I am also of the opinion that the Judge did not take into account factors which he ought to have taken into account.
- In deciding whether a person is employed under a contract of service in any particular case, it can be dangerous to rely on guidance given in other cases, because, although the guidance may appear to have been intended to be of a relatively general nature, it is inevitably derived from the facts of the case, or at least based on the type of case, under consideration. That point is well illustrated by the reasons given in the Privy Council for allowing the appeal in Lee Ting, where at  2 AC 386B, one finds this:
"In arriving at his conclusion the District Judge relied upon two dicta of Denning LJ which, whilst no doubt of value in the determination of the cases in which they were spoken, would appear to have little relevance to the facts of the present case and if misapplied may have led to an erroneous conclusion."
The two observations of Denning LJ there referred to appeared, on their face, to be laying down general guidance in all cases where the issue is whether a person is employed by another under a contract of service.
- In the present case, many of the features of the arrangement between the respondent owners and those on board the Vessel, and indeed as between those on board amongst themselves, were inevitable because of the fact that the respondents were the owners of the Vessel, or because of the very nature of the venture upon which the Vessel was engaged, namely fishing at sea. Thus, the fact that the Vessel was owned by the respondents alone meant it was inevitable that they would be responsible for keeping the Vessel, machinery, and its fishing equipment in good condition; it was inevitable that they would have some say as to where the Vessel went, in the sense, for instance, of being able to veto dangerous waters. Equally, it was inevitable that there should be a Skipper, and that he should have some control and authority over the other members of the crew and that, presumably, he would be the natural channel of communication between members of the crew and the owners. Further, the nature of the venture was such that those on board would have to have a substantial degree of control over where to fish and for how long to fish.
- That is not to say that those factors are therefore of no relevance when deciding whether or not the deceased were "employed under a contract of service", because, inevitable or not, they were features of the relationship which existed between the parties. However, it seems to me legitimate, indeed appropriate, to bear in mind which features of the relationship, which are in principle relevant to the question of determining its characterisation, are virtually inevitable in light of the nature of the enterprise concerned, and which features are not so inherent. Of course, the very fact that some features are inevitable because, for instance, the respondents owned the Vessel, can rightly be said to serve to emphasise why the fact that they owned the Vessel assists the argument that the crew were engaged under contracts of service.
- The aspects in respect of which the parties were relatively free to negotiate any terms that they wished, subject always to general commercial constraints, their own respective circumstances, and custom, were in relation to the terms of remuneration, and the other terms of engagement. So far as remuneration is concerned, there was no question of the respondent owners paying any sort of fixed periodic sum to members of the crew, even as a relatively small proportion of their total remuneration, although there were a couple of occasions when a member of the crew received a small advance from the respondents in anticipation of a trip, which advance was subsequently deducted by the respondents from that crew member's share of the proceeds of that trip. The respondents and the four crew members shared the profits of each trip, after the deduction of relatively small expenses. Further, if a particular trip proved abortive, the members of the crew got nothing. To that extent, the arrangement, as I see it, involved very much more of a joint or common venture, as opposed to a contract of service.
- We were referred to a number of decisions of the Scottish, Irish and Canadian Courts where the question, of whether or not a share fisherman was employed under a contract of service, had to be determined. As counsel accept, the cases do not speak with one voice, turn at least to some extent on their own particular facts, and are in any event not binding on us. However, in a number of those cases, the Scottish Courts appears to have considered that a very important, even decisive, factor in determining whether or not members of the crew were employed under a contract of service was whether or not they shared in losses. This is apparent, for instance, from Scottish Insurance Commissioners –v- M'Naughton 1914 SC 826 where, at 833, Lord McKenzie said that "[t]he liability for loss is to my mind the determining factor in this case", a view with which Lord Skerrington and Lord President (see at 834) agreed. It is also apparent from the more recent decision of the Extra Division of the Court of Session in Noble –v- Osprey Trawlers Ltd 1998 SC 835, where at 838,the Lord Sutherland giving the opinion of the Court, said:
"[T]he vital criteria in considering whether a crew member is an employee or a joint venturer are that he should derive his remuneration solely from an equal sharing of the profits of the voyage and that he should be liable for any loss sustained during the course of the fishing operations."
In that case, where the facts (set out at 1998 SC 838A to 840A) were strikingly similar, but not identical, to the facts of this case, the Court held that there was no contract of service. In that case, there had been one loss-making trip, "due to an engine failure during the course of the fishing operations" (see at 1998 SC 840B) and the loss had been carried forward to the next trip, which was profitable; however, the crew members were "not expected to pay in any money towards those or any other losses and did not do so" – see at 1998 SC 839.
- In the present case, it can fairly be said that there are two respects in which members of the crew would be responsible for loss. The first is that, where there was an abortive trip (because, say, the engine breaks down), the cost of the abortive trip, at least so far as the cost of fuel and, I think, ice is concerned, was added to the cost of the subsequent successful trip (i.e. after the engine had been repaired and the Vessel went back to sea). It is a point of real force, but I accept that it is an argument which cannot be taken too far: as Mance LJ observed during argument, it could be perceived as involving the venture including the later successful trip being notionally extended back to cover the initial abortive trip. Nonetheless, it was a point which in my view rightly impressed the Extra Division in Noble 1998 SC 835. In that case there does not appear to have been evidence, as there was in this case, that the crew would not have been expected to have actually paid towards an unprofitable completed trip. However, as the evidence in this case showed, an unprofitable voyage, in the sense of a voyage producing insufficient fish to make any profit at all to distribute was a very unusual event indeed.
- With regard to the sharing of losses, it can secondly be said that, on a trip which produced no fish or insufficient fish to cover the cost of fuel, ice, or landing charges etc., the members of the crew contributed towards the loss, albeit to a relatively limited extent. This would be on the basis that their time and effort on the trip would have been uncompensated, as would any use, damage or loss of their clothing (e.g. oilskins), equipment (e.g. knives), or bedding. In relation to a wholly abortive voyage at any rate, that would almost inevitably be a far smaller loss than that suffered by the owners, who would be out of pocket with regard to fuel, ice, and depreciation and wear and tear of the Vessel and its machinery and equipment, but it is nonetheless a loss. As Lord McKenzie said in Scottish Insurance at 1914 SC 832:
"It is established that the liability of all the crew is for a share of the general loss. Even if it only resulted in the individual fishermen having to bear the cost of his own provisions, and his share of the running expenses, this would nonetheless be a contribution on his part to the stock embarked in the joint adventure."
- In my view, the mere fact that, in relation to an abortive voyage, a crew member's financial exposure was likely to be much less than that of the owners does not call into question the notion that the crew did bear some of the losses, albeit to a pretty limited extent. Although his financial exposure in terms of actual outgoings might be relatively small, the member of the crew would have given his time and effort, as well as the use of his clothing and equipment, for no return whatever. Furthermore, the relative position of the parties on a profitable voyage, while obviously not precisely mirroring the respective positions on a loss-making voyage, is not uninstructive. Ignoring the first five percent which was payable to them, the owners would get six times what an average member of the crew would get (because the owners received sixty percent of the profit and the four crew members shared the balance). Further, apart from the cost of fuel, ice and landing charges, the owners always took the risk on the maintenance, repair, and risk of loss on their "equipment", namely the Vessel, in the same way as the members of the crew did on their equipment, whether or not the trip was profitable. No doubt, the high proportion of the profits payable to the owners reflected the value of what they contributed to each trip, in terms of the Vessel itself, but also in terms of the cost of repairing, maintaining and insuring it.
- Although I am not saying that the arrangement in the present case was necessarily a partnership, it is interesting to note this observation in Lindley & Banks on Partnership (Seventeenth Edition, 1995) at paragraph 5-27:
"Persons who agree to share the profits of a venture are prima facie partners, even though they may also have agreed between themselves that they will not be liable for losses beyond the amount of their respective contributions."
The authority referred to in support of that proposition, Brown –v- Tapscott (1840) 6 M&W 119 is cited as support for substantially the same proposition in Halsbury's Laws (Fourth Edition) Volume 35 at paragraph 12.
- There are additional features of the financial arrangements between the parties which seem to me to point against the deceased having been employed under contracts of service, and which do not seem to have been given any real weight by the Judge. First, there is the fact that the proceeds of a trip were divided and paid out by Stevensons, rather than by the respondents. Secondly, there is the fact that the apportionment of the 40% payable to members of the crew was determined by one of their number, and not by the respondent owners, who were not involved in this exercise. These factors tend to suggest to me that each member of the crew was engaged on a venture together with the other members and with the owners, as opposed to being employed under a contract of service by the owners.
- As I have mentioned, the deceased each paid tax and National Insurance contributions on the basis that he was self employed. Although that seems to have been a very important point, in connection with the issue of whether or not the appellant was employed in Massey –v- Crown Life Insurance Co.  1 WLR 676 at 681 (per Lord Denning MR and per Lawton LJ) I do not think the point should be given as much weight in the present case. First, the facts in Massey  1 WLR 676 were rather unusual, in that there had been an express agreement as to the status of the appellant in that case. Secondly, it is well arguable that the law has moved on in relation to this point: see the later decision of this Court in Lane –v- Shire Roofing Company (Oxford) Limited  IRLR 493 at 495 to 496 (a case which also emphasises that the generalised test laid down in some cases may not always be reliable – see at  IRLR 495). However, the point is significant.
- Further, the status of share fishermen is specifically dealt with under various Social Security Regulations and other Regulations - e.g. Regulation 1(2) of the Social Security (Mariners' Benefits) Regulations 1975 (SI 1975/529), Regulation 86 of the Social Security (Contributions) Regulations 1979 (SI 1979/591), Regulation 38 of the Income Support (General Regulations) 1987 (SI 1987/1967), and Regulation 13 of the Social Security Benefit (Computation of Earnings) Regulation 1996 (SI 1996/2745). Those Statutory Instruments treat share fishermen (defined in terms which plainly included the crew members in the present case) as people employed "other than under a contract of service". In the context of determining whether a share fisherman is "employed under a contract of service", which will depend on the facts of the particular case, the fact that he is treated as self-employed for taxation purposes plainly cannot be decisive. However, it is a point of some significance, particularly in a case such as this, where it appears to have been accepted that there was nothing unusual in the share fishing arrangements.
- In light of this analysis, I consider that the financial arrangements between the respondent owners and the members of the crew point strongly against the latter having been "employed under a contract of service" by the former. There is no doubt that remuneration of all parties, including the crew members, depended solely on sharing the profits of each trip. Losses, in the sense of the cost of fuel and ice, were shared in the case of abortive trips due to the Vessel breaking down. The position would apparently have been somewhat less stark on completed trips where losses were suffered – if that had ever occurred. Evan in such a case, the crew members would have suffered loss, in terms of wasted time and effort, and, albeit to a relatively limited extent, wear and tear and wasted use of their equipment, to which the owners did not contribute. Thus, this type of loss would also have been suffered by the crew members if (which never happened) there had been a completed trip which resulted in no fish or a loss after expenses.
- The absence of any written contract, the fact that membership of the crew on each trip was somewhat ad hoc, and the fact that crew members sometimes sailed on other fishing vessels, are, I think, fairly neutral factors. The practice whereby a crew member could nominate an alternative also does not seem to me to be of much significance: the Skipper could refuse the nomination. If anything, I consider that these factors tend to lie rather more happily with there being no contract of service. The right of the respondent owners to require someone to cease being a crew member does not, at least in my view, assist much either. Each crew member could decide whether he went on a trip, so he had a reciprocal right; the difference only lay in the consequences. Because the respondents owned the Vessel, departure of a crew member (at whoever's choice) would prevent him, but not the owners, participating in the proceeds of the next trip. Further, the Skipper, whose death underlies one of the claims in these proceedings, also had a veto over crew membership in practice: he chose the crew.
- The factors which seem to have primarily persuaded the Judge that the crew members in this case were employed under a contract of service were the fact of the respondents' ownership and control of, and responsibility for, the Vessel, its machinery and fishing equipment, and the fact that crew members "did not have to meet any of the losses incurred". So far as the latter factor is concerned, I consider that, in light of the analysis of the position of the parties on an abortive excursion (whether due to a breakdown, which sometimes happened, or on a completed trip, which did not), the Judge's conclusion was not correct. It is fair to him to say that the point appears to have been argued somewhat more fully before us.
- As to the former factor, namely the fact and consequences of the respondents' ownership and control of the Vessel, the Judge said this:
"[T]he owners… provided nearly all the equipment for the business of fishing…. [T]he basic method [of fishing] was dictated by the type of vessel and the fishing equipment provided by the owners…. It was the owners only who decided on maintenance of the Vessel and gear…. The crew were not in a position to resolve [technical problems with the Vessel]; that was a matter for the owners. To that extent the crew had little opportunity to profit from sound management in the performance of their task as fishermen."
- In my view, these features cannot, certainly in this case, properly be accorded enough weight to displace the conclusion indicated by the financial arrangements between the parties (including the tax status of the deceased). First, while the fact that these features are inevitable does not mean that they should be ignored, it gives them significantly less weight than the Judge accorded them. Secondly, there were other inevitable features which point the other way, in my opinion with at least equal force. I have in mind, in particular, the fact that the crew decided when, where, and for how long, to fish; that the crucial act, from the commercial viewpoint, the recovery of fish, was exclusively determined and carried out by the crew, not by the owners, and that, while the owners, not the crew, controlled the Vessel in harbour, the crew, not the owners, controlled it when out fishing. These are not features which the Judge seems properly to have taken into account. Thirdly, there is the fact that each member of the crew contributed substantially to the venture through his experience, skill and knowledge in running the Vessel and searching for and recovering fish. That was something which appears not to have been taken into account by the Judge at all. Fourthly, I consider that the nature of the financial arrangements is of crucial importance (coupled with the tax treatment of the crew members), as the Scottish Courts appear to have concluded.
- In the event, therefore, I have reached a different conclusion from that of the Judge, and I consider that this Court can, indeed should, interfere with his decision on the second issue. From the point of view of the appellants this a conclusion which is to be regretted: if they have a valid claim otherwise worth more than that permitted by the Convention, it seems harsh that it should be subject to a cap or maximum. The answer appears to be that the wider public interest requires the existence of such a cap on damages in a case such as this.
- Accordingly, I would dismiss the appellants' appeal against the Judge's decision on the first issue, and allow the respondents' appeal against the Judge's decision on the second issue.
- I have had the benefit of reading in draft the judgment delivered by Mr Justice Neuberger, and I gratefully adopt his outline of the facts and the issues. As to the claimants' appeal on the first issue, I agree with what he has said, and his conclusion. I therefore confine myself to the second issue. This is whether each of the deceased was "on board" the "Margaretha Maria" (or "employed in connection with" her) "under a contract of service governed by the law of any part of the United Kingdom".
The concept of a contract of service
- Most English authorities considering this concept are concerned with the distinction between contracts of service and for services. They touch only obliquely on the possibility which is at the heart of the present case, namely that the relationship involved some form of business partnership or joint adventure between independent persons to share profits and perhaps (although this is in issue) losses. Two first instance judgments have set their mark on the distinction between contracts of service and for services. The first is that of MacKenna J in Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance  2 QB 497 and the second that of Cooke J in Market Investigations Ltd. v. Ministry of Social Security  2 QB 173.
- MacKenna J summarised his conclusions as follows:
"A contract of service exists if these three conditions are fulfilled. (i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, either expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service."
- In MacKenna J's view, control was a necessary, but not sufficient, condition of a contract of service. A contract might thus be for services, rather than of service, even if control existed. It is, I think, useful to look at some of his citations. The first was Queensland Stations Proprietary Ltd. v. Federal Commissioner for Taxation (1945) 70 CLR 539, a case concerning a drover, where Dixon J said at page 552:
"In considering the facts it is a mistake to treat as decisive a reservation of control over the manner in which the droving is performed and the cattle are handled. For instance, in the instant case the circumstances that the drover agrees to obey and carry out all lawful instructions cannot outweigh the countervailing considerations which are to be found in the employment by him of servants of his own, the provision of horses, equipment, plant, and a remuneration at a rate per head delivered."
- MacKenna J also cited Humberstone v. Northern Timber Mills (1947) 79 CLR 389, where Dixon J had said:
"The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in his employer so that he was subject to the latter's' order and directions."
- A third citation was from the advice of the Privy Council in Montreal v. Montreal Locomotive Works Ltd.  1 DLR 161, 169, where Lord Wright said:
"In earlier cases a single test, such as the presence or absence of control, was often relied on to determine whether the case was one of master and servant, mostly in order to decide issues of tortious liability on the part of the master or superior. In the more complex conditions of modem industry, more complicated tests have to be applied. It has been suggested that a fourfold test would in some cases be more appropriate, a complex involving (1) control; (2) ownership of the tools; (3) chance of profit; (4) risk of loss. Control in itself is not always conclusive. Thus the master of a chartered vessel is generally the employee of the shipowner though the charterer can direct the employment of the vessel. Again the law often limits the employer's right to interfere with the employee's conduct, as also do trade union regulations. In many cases the question can only be settled by examining the whole of the various elements which constitute the relationship between the parties. In this way it is in some cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior."
- MacKenna J commented that it was easier to relate considerations (2), (3) and (4) identified by Lord Wright to the case mentioned in the last sentence of the quotation (than to derive a four-fold test). He went on:
"If a man's activities have the character of a business, and if the question is whether he is carrying on that business for himself or for another, it must be relevant to consider which of the two owns the assets ("the ownership of the tools") and which bears the financial risk ("the chance of profit," "the risk of loss"). He who owns the assets and bears the risk is unlikely to be acting as an agent or a servant. If the man performing the service must provide the means of performance at his own expense and accept payment by results, he will own the assets, bear the risk, and be to that extent unlike a servant."
- MacKenna J also considered US v. Silk (1946) 331 US 704, where the United Supreme Court suggested the test was not "power of control, whether exercised or not, over the manner of performing service to the undertaking, " but whether the men were employees "as a matter of economic reality". The Court identified as material factors "the degrees of control, opportunities of profit or loss, investment in facilities, permanency of relation and skill required in the claimed independent operation". Applying this test, it held that unloaders who came to Silk's yard when they wished to unload coal from wagons to a designated place, using their own picks and shovels and being paid per ton of coal shifted were employees, while the owner truck-drivers who collected coal from Silk's yard when they chose and delivered it at a rate per ton to Silk's customers, paying all the expenses of operating the trucks, including the wages of any extra help they engaged, were independent contractors. So too were owner drivers who paid all the costs of operating their trucks, but had agreed only to work for a road haulier, Greyvan, and to follow his rules, regulations and instructions (including, if they engaged a relief driver, being present when he drove), in return for a percentage of the tariff that Greyvan charged to customers.
- MacKenna J viewed as raising more questions than it answered a dictum of Denning LJ, that the test "does not rest nowadays on submission to orders", but "depends on whether the person is part and parcel of the organisation". MacKenna J went on:
"Then there are "the four indicia" of a contract of service, first mentioned in Park v. Wilsons and Clyde Coal Company Ltd. (1928) SC 121, 159 and repeated by Lord Thankerton in Short v. J and W Henderson Ltd. (1946) 62 TLR 427, 429:
"(a) The master's power of selection of his servant; (b) the payment of wages or other remuneration; (c) the master's right to control the method of doing the work; and (d) the master's right of suspension or dismissal."
It seems to me that (a) and (d) are chiefly relevant in determining whether there is a contract of any kind between the supposed master and servant, and that they are of little use in determining whether the contract is one of service. The same is true of (b), unless one distinguishes between different methods of payment. payment by results tending to prove independence and payment by time the relation of master and servant. Reference to the facts in Park v. Wilsons and Clyde Coal Company Ltd. shows the use for which these tests were devised.
Park had contracted with the company to drive a stonemine at a money rate per fathom, and he had engaged Haggerty to help him. Park and Haggerty had been injured by the negligence of other men admittedly in the company's service. The question was whether Park and Haggerty were fellow-servants of those whose negligence had injured them, so as to be caught by the doctrine of common employment. In deciding whether Haggerty was a servant of the company or of Park, it was obviously relevant to inquire who had selected him, who paid his wages and who had the right of suspending or dismissing him, and if Park did (or could do) these things otherwise than as the company's agent, he himself was unlikely to be their servant."
- In Market Investigations Ltd. v. Ministry of Social Security  2 QB 173, Cooke J referred to most of the same authorities and said that:
"…. it has long been apparent that an analysis of the extent and degree of control is not itself decisive. …… The master [of a ship] may be employed under what is clearly a contract of service, and yet the owners have no power to tell him how to navigate his ship. As Lord Parker CJ pointed out in Morren v. Swinton and Pendlebury D.C.  1 WLR 576, 582, when one is dealing with a professional man, or a man of some skill and experience, there can be no question of an employer telling him how to work; therefore the absence of control and direction in that sense can be of little, if any, use as a test."
- Cooke J contrasted the converse case of the drover, above, and, after referring to Silk and Lord Denning's dictum, went on:
"[These] observations …. suggest that the fundamental test to be applied is this: "Is the person who has engaged himself to perform these services performing them as a person in business on his own account?" If the answer to that question is "yes," then the contract is a contract for services. If the answer is "no." then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task.
The application of the general test may be easier in a case where the person who engages himself to perform the services does so in the course of an already established business of his own; but this factor is not decisive, and a person who engages himself to perform services for another may well be an independent contractor even though he has not entered into the contract in the course of an existing business carried on by him."
- The Privy Council in Lee Ting Sang v. Chung Chi-Keung  2 AC 374, 382 considered that "the matter had never been better put than by Cooke J in Market Investigations Ltd. ….".
- In its recent decision in Montgomery v. Johnson Underwood Ltd.  ICR 819, both Buckley J, with whom Brooke LJ agreed, and Longmore LJ identified as part of the "irreducible minimum" for the existence of a contract of employment, mutuality of obligation and the requirement of (some framework of) control. Buckley J cited Dixon J's words in Humberstone, and said:
"A contractual relationship concerning work to be carried out in which the one party has no control over the other could not sensibly be called a contract of employment."
- MacKenna J in Ready Mixed Concrete also addressed the question to what extent parties may by their own words define the nature of a contract. The contract in that case provided expressly that it was made with an independent contractor. At pp.512-3 MacKenna J said that such a declaration might help resolve a doubtful situation. Lord Denning MR echoed this in Massey v. Crown Life Insurance Co.  1 WLR 676, saying at page 680 that
"…. the way in which the parties draw up their agreement and express it may be a very important factor in defining what the true relation was between them. If they declare that one party is self-employed, that may be decisive".
- Mrs Blackburn QC for the claimants submits that the relevance of this last principle has been watered down by the authority of Lane v. Shire Roofing Company (Oxford) Ltd.  IRLR 493. In that case, the court of appeal drew attention to the fact that "When it comes to the question of safety at work, there is a real public interest in recognising the employer/employee relationship when it exists", because of the responsibilities that the common law and statutes such as the Employers' Liability (Compulsory Insurance) legislation place on the employer. After referring to market changes, in and since the 1970s, particularly greater flexibility, more temporary and shared employment, perceived advantages for both sides in a relationship being that of an independent contractor, the court reiterated that "there were, and are, good policy reasons in the safety at work field to ensure that the law properly categorises between employees and independent contractors". Aikens J, when referring to this authority, observed that this statement does not assist in deciding how to categorise, and that as an analogy on the facts it was not very close to the present case. I agree. I add that I do not regard the case as undermining the significance capable of being attached to the way that parties have expressed their relationship, including the way they have conducted themselves under it where it is not contained in writing.
- The closest that the above cases come to considering the factors of sharing of profit and (possibly) loss which existed in relation to the present share-fishermen is in the statement of Lord Wright cited and commented upon by Mackenna J. But Lord Wright did not specifically address the distinction between a contract of service and partnership or joint venture. What his statement does indicate is that a contract of employment may involve some sharing of profit and the risk of loss. Incentive or commission schemes are by no means uncommon features of modern life. An employee under a contract of service may also be made answerable for risks, e.g. that of non-payment by a customer, without ceasing to be such. Partnership, in contrast, is the relationship existing between two or more independent persons, contracting together to engage in a business in common with a view to making and sharing profit. Generally, a partner will contribute either property, skill or labour, but sleeping partners who contribute nothing are also not uncommon. Generally, partners share in any losses, but this too is not "essential to the legal notion of partnership" (see Halsbury's Laws of England, Vol. 35, Title: Partnership paras. 2 and 12, quoting McCardie J in Jeffrey v. Bamford  2 KB 351, 358-9). Whether a partnership exists is a mixed question of fact and law: Halsbury's Laws, paragraph 2, citing Keith Spicer Ltd. v. Mansell  1 WLR 333, 335G per Harman LJ, disagreeing in this respect with the contrary statement in Victorian authority, and adding: "It is an inference from the primary facts, which the judge found".
- The position of share fishermen has been considered in a number of authorities. The most significant are Scottish and Irish, but there is also Canadian and limited English authority. Although other fishing nations have dominated the law reports, I think that all these cases merit attention, to see what if any general principles and approach may emerge. While the judge records both counsel as agreeing that the Scottish authorities turned on their particular facts (as they no doubt did), this may, I think, have led him too readily to dismiss their significance and the assistance they give as to relevant elements and their importance. It would be undesirable that different parts of the same islands should take different stances with regard to the status of share fishermen, which the judge described as "well-recognised" both in South West England and in Scotland, except where there are substantial differences on the facts.
- In The Scottish Insurance Commissioners v. M'Naughton 1914 SC 826 the issue submitted to a three-judge Court of Session was whether share fishermen were in employment and so liable to pay national insurance. Share trawl fishermen were paid either wages or, in the case of the skipper and mate, a share of the net balance of the value of the fish after limited deductions (pursuant to award of the Aberdeen Conciliation Board) even if the voyage made a loss. They were already paying national insurance contributions. The court held that they were employees. Other fishermen on steam drifters, steam liners and sailing boats contributed their skill and labour and in some cases nets or lines, and were remunerated by a share of net profits, as distinct from gross returns. The evidence showed that, in the case of voyages showing a deficiency, each of these fishermen had to pay his share of the loss. Lord Mackenzie, with whose opinion Lord Skerrington and the Lord President also concurred, said:
"All this appears to me to differentiate the case from one of a contract of service and to place it in the category of joint adventure. No doubt instances of deficit at the end of a voyage are not common. They appear to arise mainly in the case of winter herring fishing. When a loss is incurred the amount may be paid at once, or what is more common in practice the fisherman who is liable suffers a deduction from what is earned by him on a succeeding voyage. This is so in the case of liners as well as drifters. Instances are given in the case where liability for such loss was enforced by action in the case of the crews of drifters. An attempt was made on beha1f of the petitioners to show that in each case the amount of the loss was less than the amount of the food bill, or in any event not more than the amount of the food bill plus the expense of the transport of the fishermen to and from the fishing ground. In my opinion this contention of the petitioners is not well founded. It is established that the liability of all the crew is for a share of the general loss. Even if it resulted in the individual fisherman having to bear the cost of his own provisions, and his share of the running expenses, this would none the less be a contribution on his part to the stock embarked in the joint adventure. He gives the use of this along with his labour, just in the same way as the owner gives the use of his share of the boat, as the net shareman gives the use of his nets, and as the owner of the lines gives the use of his lines. I am unable to regard either nets or lines as mere tools; they are stock, the use of which is given to the joint concern. I do not consider it necessary to go into the details of the decrees which have been obtained against crews for their shares of loss."
- A little later, he said:
"The liability for loss is to my mind the determining factor in the case. …. An agreement to share profits and losses …. in the sense of making good the losses if any are sustained may be said to be the type of a partnership contract. As already indicated, it is profits and not gross returns which are shared by these fishermen."
- Mair v. Wood 1948 SC 83 concerned what was described as a share-fishing joint adventure, between the owner who contributed his boat and her gear and the four crew who contributed their services. Neither side's primary case was that the relationship was one of master and servant, and the case does not examine either the test or the facts or therefore carry matters forward. Parker v. Walker 1961 SLT 252, decided by Lord Walker in the Outer House, is of greater interest. The claim was for personal injury during what the pursuer claimed was his employment under a contract of service on the defenders' fishing boat. The boat, nets and other fishing gear were the property of her owner. The seven crew were remunerated by a share of net profits "in accordance with the custom of Seine-net fishing". A fish selling company sold the fish and kept voyage accounts. This company took 5% of the gross as commission, deducted provisioning and marketing costs, and then distributed the net balance in equal shares between the owner and crew. Crew members returned their shares for tax purposes under Schedule D and were treated for National Health insurance purposes as self-employed, the cost of their insurance stamps forming an outlay deducted by the fish selling company. Seine-net fishing had been since the war generally profitable, and there had been while the pursuer was on board no week or trip which resulted in a loss. The judge considered it a reasonable inference from the evidence that any loss on any week would have been carried forward against the crew member's share of the net profit on the next week, but the witnesses differed as to a crew member's liability. The judge thought that a crew member who left a boat when there was a loss "would not easily obtain a job on another boat in Aberdeen". It was argued that the case was to be distinguished from M'Naughton (above), because in that case there had been evidence that fishermen sometimes paid losses at once, though more often the losses were carried forward against profit in a succeeding week But the judge concluded that
"the facts (a) that each contracting party is remunerated solely by a share of the net profit of the business; and (b) that such remuneration is due not from one to another, but from the common agent of each [i.e. the fish selling firm], tips the balance in favour of joint venture with all its legal consequences of liability for loss. I accordingly hold that the legal relationship was that of joint adventure."
- Mrs Blackburn QC for the claimants describes as odd the reference to liability for losses as a consequence of the conclusion that there was a joint venture. Whether and how far there was liability, over and above the liability to have a loss deducted from a profitable next voyage was however the subject of conflicting views of witnesses in that case. The judge was, it seems to me, expressing a legitimate conclusion of law on the basis of the other circumstances established by the evidence (including the liability to have a loss deducted from a profitable next voyage). In this respect, the case may have some parallel with the present, although (as appears in paragraph 116 below) I see no reason why liability, beyond the liability to have a loss deducted from a profitable next voyage, should be determinative of the question whether or not there is a contract of service.
- In Bruce v. Clapham 1982 SLT 386 Lord Grieve, who had, as he mentioned, been unsuccessful counsel in Parker v. Walker, considered obiter the status of an injured share fisherman remunerated by a share of the net profit, in circumstances where (a) when there was no or only a small profit, the owners bore the loss or paid the whole of the profit to the crew and (b) there was no evidence of the crew ever making up to the owners what they had received at their expense when the profits had been small. Lord Grieve regarded that as a material distinction, but added that, if it had not been, he would anyway have declined to follow Parker v. Walker, giving as the reason that the Lord Ordinary did not pay sufficient attention to the test of service adumbrated in Short v. Henderson 1946 SLT 71, 73, according to which the "factor of superintendence and control has frequently been treated as critical and decisive of the legal quality of the relationship". Bearing in mind the move away from control as a decisive, as opposed to sufficient, factor, I would not accept the soundness of Lord Grieve's objection to Parker v. Walker under English law.
- The last Scottish decision is Noble v. Osprey Trawlers Ltd. 1998 SC 835, where the injured pursuer again claimed to have been employed by boat owners under a contract of service. The pursuer's initial argument was that the authorities indicated that it was necessary to consider a variety of factors, such as, was the crew member in business on his own account, did he hire his own helpers, what was the degree of financial risk, was he responsible for investment or management, did he have the opportunity of profiting from sound management, was he an employee as a matter of economic reality, who was responsible for overall safety, and the general issue of mutuality of obligations. The defenders' response was that the normal criteria were not relevant to the present case, evidently on the basis that:
"As the sheriff had pointed out in his note, there was almost universal recognition by share fishermen, by the owners, by the Inland Revenue, by the Benefits Agency, by their workmates and by anyone else who has any knowledge of the industry and inclination to consider the status of an individual that such North Sea share fishermen are regarded on all sides as self employed. Such a status has been recognised in the past in Scottish Insurance Commissioners v. McNaughton and Parker v. Walker. Accordingly the real issue in this case is whether or not the pursuer fulfilled the various criteria which were necessary to establish that he was a share fisherman and as such a joint venturer. If those criteria could be established then all the other matters which were normally relevant when there is a competition between contract of service and contract for services become irrelevant."
- In return counsel for the pursuer accepted that Scottish Insurance Commissioners v. McNaughton and Parker v. Walker were correctly decided on their own facts, and accepted that, if the criteria for a joint venture were met, the appeal must fail. The Court of Session thus treated the only issue before it as being whether the crew member derived his remuneration solely from an equal sharing of the profits of the voyage and whether he was liable for any loss sustained during the course of the fishing operations.
- The facts as found in Noble were that after each trip the first defenders (the owners) calculated the proceeds of the trip, from which they then deducted all expenses, before dividing the net sum so achieved on the basis of 65% to themselves and 35% to the crew. Any loss resultant upon these calculations was concealed by deliberately understating or omitting a cash outlay, the cost of fuel providing the greatest scope for any such manipulation since typically it would be carried forward to be taken into the account of the next fishing trip. The first defenders on occasions when a full or normal week's income was not available gave to each crewman a nominal sum in the event of there being no profit to distribute. That sum was properly regarded as an advance of remuneration, although it might well not be recovered as such from future weeks earnings. Remuneration was by way of payment after each trip and calculation of the sum due was carried out in accordance with the normal and accepted calculation method for share fisherman in the North Sea. The pursuer did not pay contributions under the PAYE scheme and paid class 4 national insurance contributions.
- The pursuer argued that it had not been established that the pursuer had any legal liability for loss, and that the payment of advances which did not appear to have been recovered out of subsequent trips indicated a contract of employment rather than any status as a joint venturer. The defenders submitted that the treatment of the loss incurred in one loss-making trip showed that the pursuer was indeed liable for that loss, as the sheriff had found the pursuer's remuneration for the subsequent trip was calculated taking into account 'the precise losses incurred on the previous trip. They submitted that this indicated that the pursuer was liable for losses as well as sharing in profits; and that the finding that he was not expected to pay in any money towards such a loss merely indicated that he was not expected to pay the loss immediately it was incurred but rather could have it carried forward to the next profit making trip – adding that this appeared to have been the practice also in both Scottish Insurance Commissioners and Parker v. Walker.
- The Court in Noble accepted the defenders' submissions, saying:
"We are satisfied that the proper inference to be drawn from the sheriff's findings was that the pursuer was liable for any losses made during the course of the fishing operations. It is quite clear that on the only occasion when a loss occurred, and we understand that that was due to an engine failure during the course of the fishing operations, that loss was indeed recovered from the pursuer by being offset against the profits from the subsequent trip. The sheriff furthermore makes it clear that it was the precise loss incurred which was recovered and not some nominal sum. The fact that the pursuer was not expected to pay immediately his share of the loss but had it carried forward to the next profitable voyage in our view does not detract from the fact that he ultimately paid for that loss. As the sheriff also found, such a treatment of a loss was normal and accepted practice among share fishermen in North Sea work. As far as the advances were concerned, the sheriff has accepted the evidence that these were payments simply to keep together a good crew and were not in any way to be regarded as remuneration under a contract of service. If they fell to be regarded as remuneration under a contract of service it would follow that there would be a legal liability for the first defenders to make such payments and the evidence certainly does not appear to disclose anything of the sort. On the whole matter therefore we are of opinion that the sheriff was fully entitled to come to the view that the necessary criteria were established for showing that the pursuer was a joint venturer and was not employed by the first defenders under a contract of service. It follows that the appeal must be refused."
- Mrs Blackburn takes issue with the Court of Session's approach of confining attention to the two factors that it identified. In her submission, the sharing of losses is also only significant if it involves an established liability to pay up losses, in circumstances where for one reason or another there is no subsequent voyage in which to set them off. I would have some sympathy for her first point, if (which I doubt) the Court of Session intended to lay down any rule of law. The court should always be prepared to look at all the circumstances. Having said that, however, there is, as it seems to me force in the observations that one finds in this case and in Irish decisions to which I will come, that the traditional considerations such as control bear lesser significance in the present than in some other contexts, since they can be regarded as consistent with the existence of either a contract of service or a contract by way of joint venture. Further, I do not accept Mrs Blackburn's second point. The carrying forward of losses is a significant form of loss-sharing. It is loss-sharing in the situation which is no doubt by far the most common situation (namely where there is a subsequent voyage, and where loss-sharing is practicable). Further, it seems to me that it will very often be impossible for pragmatic reasons to adduce primary evidence regarding the legal position in any other situation – although it may sometimes be possible, as in Parker v. Walker, to deduce a legal conclusion about this from an established practice of setting any accrued loss against any subsequent voyage's profit.
- The only other Scottish case can be mentioned quite briefly. Redman v. Piriou (unrep'd; April 2001, Sheriff of Grampian) concerned sharing of gross proceeds (after deduction only of the berthing or landing charge) between owner (61%) and six crew (39%). The owner had to bear operating and other costs such as fuel as well as insurance and depreciation. The Sheriff identified and considered a number of factors: (1) the absence of any sharing of losses; (2) sole overall control of the fishing operation exercised by the owners, and immediate de facto control during operations exercised by the skipper; the deceased crew-member took no part in deciding where or when to fish, when to put to sea, the sale of the catch of the like; (3) treatment by the deceased and the relevant Guernsey tax authorities of the deceased's status as being that of an employee (by participation in a scheme for deduction of tax); (4) the owner's right to select crew, which was "wholly at variance with the concept of partnership" between the deceased and whoever else served as crew; (5) the perception of witnesses, in which connection the Sheriff rejected as "motivated by misplaced loyalty" the crew's oral evidence that the relationship was one of self-employment, but attached significance to "unguarded" statements by one witness referring to asking for a job and working for the owners and to the owners being good employers; (6) insurance considerations which the Sheriff thought militated in favour of an employed status; and (7) the fact that the crew paid for their own travelling costs and work apparel, which militated in favour of self-employment. The Sheriff concluded on the basis of factors (1) to (6), and principally he said nos. (1) to (4), in favour of employed status. Particularly in the light of factors (1) and (3), the case is on any view distinguishable from the present.
- The first Irish case is Donelly and Byrne v. Hanlon (1893) ILTR 73, where the report shows no more than that the court held that crew who received half the net profits but had no liability to share in losses were employees. Then there is DPP v. McLoughlin  IR 355, where the issue was whether share fishermen engaged for each weekly voyage in return for a share in the net voyage profit, but without any liability to share in losses, were employed by the defendant boat owner, who sailed with the boat as a navigator. Costello J referred to the existence of the English authorities distinguishing a contract of service from a contract for services, but did not regard them as assisting greatly when the issue was whether the relationship was one of partnership or employment. He considered Parker v. Walker, and identified the distinction that the crew member there shared in losses. Even so, he concluded that the situation was one of partnership in a joint venture, and not of master and servant. He regarded "the large measure of control" that existed as arising "as much from the operations being carried on as from the contractual relationship" and as "a factor which is consistent both with the existence of a contract of service and an agreement for partnership". Likewise, he regarded the fact that the defendant selected other crew members (although on the evidence after consulting the other crew) as consistent with either relationship. The strongest argument in favour of employment was in his view that the defendant received and disbursed the proceeds of catch, even sometimes making "subs" to crew members when no profit was made. But he regarded these factors as outweighed by three others:
"Each weekly voyage was a separate venture and no crew member had a contract which entitled him to take part in any subsequent voyage. When he participated in an expedition he was not paid any wages but became entitled to a share in the net profits (if any). And, most importantly, although he engaged each crew member the defendant did not himself determine what the rate of remuneration would be; this was determined partly by custom (namely 50% of the net profits being allotted to the boat) and partly by agreement between the crew themselves. These factors, it seems to me, strongly suggest that the skipper and his crew were partners in the joint adventure undertaken each Monday morning …."
- The third Irish case is the recent decision of Carroll J in Francis Griffin v. The Minister for Social Community and Family Affairs (2nd October 2001; as yet unrep'd). Hearing an appeal on law only from two decisions of an Appeals Officer under social welfare legislation, she held that the Officer had in each case erred in not following the approach to the law taken by Costello J in McLoughlin. It was thus wrong, in her view, to concentrate on control, which was equivocal. It was a mistake of law to conclude that the provision of labour in a joint venture was not sufficient to sustain that relationship. Further, on the facts (and in contrast in this respect to McLoughlin), losses were carried forward and set against the next voyage's profits. It was, in Carroll J's view, a mistake to conclude that such an agreement to set off losses was not a commercial risk, and every fisherman had to weigh the consequences of agreeing to carry forward losses as against the possibility of sharing in a profitable catch. The share fishermen were at risk of working for no recompense if there were no profits (as on the evidence there had been on one occasion for five weeks in a row). I would for my apart agree with Carroll J's observations in all the respects I have set out.
- In the British Columbia Court of Appeal authority of Mark Fishing Co. Ltd. v. United Fishermen & Allied Workers Union (1972) 24 DLR (3d) 585, the tentative opinion of the majority, explained by Robertson JA at pages 624-8, was that share fishermen, who shared at the end of each voyage in 60% of the net voyage profit, and who were liable for any net voyage losses, were co-adventurers, rather than employees. Robertson JA mentioned at page 625 that a crew member's liability to discharge a loss "followed the member wherever he went" and "did not depend on his having profits out of which to do so on subsequent trips of a vessel of the same owner or owners". But, although he gave this point some emphasis, the case cannot be regarded as positive authority that that aspect was critical.
- The English authority of Goodeve v. Gilsons  ICR 401 is relied upon by the claimants to illustrate the proposition that sharing of profits is not inconsistent with a relation of master and servant. I do not think that the bare proposition is as such open to doubt. But the issue in Goodeve was not whether that relation existed. It was whether s.144(2) of the Employment Protection Act 1978 applied to exclude any claim for redundancy. S.144(2) provided that the earlier redundancy provisions of the Act "do not apply to employment as master or as a member of the crew of a fishing vessel where the employee is remunerated only by a share in the profits or gross earnings of the vessel". For part of the relevant qualifying period, the crew member had been employed on one or more of the employers' fishing vessels in return for a share of the profits of the whole fleet. Not surprisingly the court held that s.144(2) only applied to masters or crew members engaged for a share of the profits of the particular vessel on which they were serving. The case does not to my mind assist in the present context.
Statutory references to share fishermen
- Mr Nolan for the defendants points to the definition in a series of statutory instruments of "share fishermen" as meaning (with irrelevant minor variations):
"any person who … is ordinarily employed in the fishing industry otherwise than under a contract of service, as a master or member of the crew of any fishing boat [within the meaning of section 373 of the Merchant Shipping Act 1894 being a fishing boat] manned by more than one person, and … remunerated in respect of that employment in whole or in part by a share of the profits or gross earnings of the fishing boat; …"
- Instances are: The Social Security (Employed Earners Employment for Industrial Injuries Purposes) Regulations 1975 SI No. 467, Schedule 2 Part 1 para.1(5); The Social Security (Mariners' Benefits) Regulations 1975 SI No. 529 reg. 1(2); The Social Security (Contributions) Regulations 1979 SI No. 591, reg. 86; The Social Security Benefit (Computation of Earnings) Regulations 1996 SI No. 2745 reg. 13(1)(c); The Jobseeker's Allowance Regulations 1996 SI No. 207 reg. 156. Other regulations refer to a self-employed earner whose employment is that of a share fishermen as defined in The Social Security (Mariners' Benefits) Regulations 1975 SI No. 529: see The Income Support (General) Regulations 1987 SI No. 1967 reg. 38; The Council Tax Benefit (General) Regulations 1992 SI No. 1814 reg. 22; The Housing Renewal Grants Regulations 1996 SI 2890 reg 27; and The Family Credit (General) Regulations 1987 SI No. 1973 reg 22.
- These statutory definitions suggest that the concept of a self-employed share fishermen is well-known to the fishing industry and the legislature, and also demonstrate that a description of someone as "employed" by no means indicates whether he is employed by a master or self-employed. However, Parliament has also shown itself conscious that a fisherman remunerated only by a share of the profits or gross earnings of a vessel may be employed under a contract of service: otherwise the provisions of s.144(2) of the 1978 Act, cited above, now s.199(2) of the Employment Rights Act 1996 would not have been necessary. So ultimately it must be a matter of judgment in the light of all the relevant circumstances and factors into which category any fisherman falls.
The proper appellate approach
- This is an appeal under CPR 52.11 which provides:
"(1) Every appeal will be limited to a review of the decision of the lower court unless-
(b) the court considers that in the circumstances of an individual appeal it would be in the interests of justice to hold a re-hearing.
(3) The appeal court will allow an appeal where the decision of the lower court was-
(a) wrong; or
(b) unjust because of a serious procedural or other irregularity in the proceedings of the lower court.
(4) The appeal court may draw any inference of fact which it considers justified on the evidence."
- In the absence of any contract in writing (the construction of which would be a matter of law), an issue whether a particular relationship involves employment under a contract of service has been said to be one of "fact": see per Lord Griffiths in Lee Ting Sang at page 384, citing Workman's Compensation Act authorities, such as Smith v. General Motor Cab Co. Ltd.  AC 188; or of "mixed fact and law": see per Lord Griffiths at page 385, citing the majority in O'Kelly v. Trusthouse Forte plc  QB 90. In both contexts, the courts were concerned with the decisions of fact-finding tribunals from whom an appeal only existed on a point of law. That was also the context in Edwards v. Bairstow  AC 14. Even in that context, the reasoning of the majority in O'Kelly and of the House of Lords in Edwards v. Bairstow was however nuanced.
- Thus I note that Lord Donaldson MR said at page 124B in O'Kelly:
"The test to be applied in identifying whether a contract is one of employment or for services is a pure question of law and so is its application to the facts. But it is for the tribunal of fact not only to find those facts but to assess them qualitatively and within limits, which are indefinable in the abstract, those findings and that assessment will dictate the correct legal answer. In the familiar phrase "it is all a question of fact and degree".
And in Edwards v. Bairstow Lord Radcliffe, after expressing the view that English courts had been 'over-ready to treat these questions as "pure questions of fact'", went on:
"The court is not a second opinion, where there is reasonable ground for the first. But there is no reason to make a mystery about the subject that the commissioners deal with or to invite the courts to impose any exceptional restraint upon themselves because they are dealing with cases that arise out of facts found by commissioners. Their duty is no more that to examine those facts with a decent respect for the tribunal appealed from and if they think that the only reasonable conclusion on the facts found is inconsistent with the determination come to, to say so without more ado."
- The Privy Council in Lee Ting Sang viewed these principles as relevant even in a context where there was, so far as appears, no limitation of the right of appeal to points of law. Speaking of an issue whether a person was employed under a contract of service, Lord Griffiths said at page 385:
"….. there will be many borderline cases in which similarly instructed minds may come to different conclusions. It is in such situations that an appeal court must not interfere and it is in this sense that the decision is said to be one of fact. But an appellate court must not abdicate its responsibility and it is worth bearing in mind the words [of Lord Radcliffe, in the passage cited above]"
- In a case where (as here) the right of appeal is not limited to points of law, the ability of this court in appropriate circumstances to arrive at different conclusions or inferences of fact must also be borne in mind. It is a factor placing the court in a somewhat different position to that of the courts in Smith, O'Kelly and Edwards v. Bairstow. That brings me back to CPR 52.11, and its provision that "every appeal will be limited to a review unless …. the court considers that in the interests of an individual appeal it would be in the interests of justice to hold a re-hearing". We did not hear argument on this provision, and it is not necessary to venture far into its implications. It is above all a provision designed to introduce a unified appellate approach at every level; in that respect, subject to CPR 52.11(1)(b), it clearly alters, for example, the former procedure whereby an appeal from a master to a judge was by way of complete rehearing. With regard to an appeal to this court (which would never have involved a complete rehearing in that sense), the language of "review" may be said to fit most easily into the context of an appeal against the exercise of a discretion, or an appeal where the court of appeal is essentially concerned with the correctness of an exercise of evaluation or judgment - such as a decision by a lower court whether, weighing all relevant factors, a contract of service existed. However, the references in CPR 52.11(3) and (4) to the power of an appellate court to allow an appeal where the decision below was "wrong" and to "draw any inference of fact which it considers justified on the evidence" indicate that there are other contexts in which the court of appeal must, as previously, make up its own mind as to the correctness or otherwise of a decision, even on matters of fact, by a lower court. Where the correctness of a finding of primary fact or of inference is in issue, it cannot be a matter of simple discretion how an appellate court approaches the matter. Once the appellant has shown a real prospect (justifying permission to appeal) that a finding or inference is wrong, the role of an appellate court is to determine whether or not this is so, giving full weight of course to the advantages enjoyed by any judge of first instance who has heard oral evidence. In the present case, therefore, I consider that (a) it is for us if necessary to make up our own mind about the correctness or otherwise of any findings of primary fact or inferences from primary fact that the judge made or drew and the claimants challenge, while (b) reminding ourselves that, so far as the appeal raises issues of judgment on unchallenged primary findings and inferences, this court ought not to interfere unless it is satisfied that the judge's conclusion lay outside the bounds within which reasonable disagreement is possible. In relation to (a), we must, as stated, bear in mind the important and well-recognised reluctance of this court to interfere with a trial judge on any finding of primary fact based on the credibility or reliability of oral evidence. In the present case, however, while there was oral evidence, its content was largely uncontentious.
- The judge summarised the agreed facts as follows:
"(1) All the deceased were "share fishermen". The arrangement by which they worked on board the vessel was in general terms common amongst share fishermen in SW England. Thus they did not receive a fixed wage or salary for time spent fishing, but instead received a share of the proceeds of sale of the catch from any particular trip.
(2) There were no written contracts between the deceased and the defendant shipowners.
(3) The deceased paid tax as "share fishermen". They were treated by the Inland Revenue as self - employed and taxed on that basis.
(4) The deceased were responsible for their own National Insurance Contributions. They had no entitlement to sickness pay, paid holidays, redundancy payments or compensation for unfair dismissal.
(5) Mr Holmes had joined the vessel as mate in January 1995. In October 1995 it was agreed with the Defendants that he would act as skipper. Peter Todd joined as mate in January 1996. Mr Marshall joined as a crew member in June 1997 and Mr Kerry Todd joined in October 1997.
(6) Mr Holmes chose the crew himself, but would liaise with Mr Chope before doing so. The defendants could have instructed Mr Holmes not to stop using a particular individual as crew, although this would only have been in exceptional circumstances and it never happened in fact.
(7) As skipper Mr Holmes was responsible for the general day to day management of the vessel, her handling, the correct use of equipment and for reporting any defects in the vessel on her return to port. Between trips he would ensure that the fishing gear (supplied by the defendants) was ready for the next trip.
(8) Mr Holmes made the decision on when the vessel went to sea and who would crew her; and where and for how long they would fish. (The judge noted here that there was a dispute about whether the decisions about where to fish were made by the skipper in conjunction with the crew.) As skipper he gave instructions to the other crew members at sea.
(9) Neither the skipper nor any crewman was entitled to send someone along in his place. But if a crew member should wish not to take part in a particular trip he might well put forward someone else who was acceptable to the others on the vessel to take his place.
(10) After each trip the catch was sold at auction by W Stevenson & Son ("Stevensons"), who are the owners of a large fishing fleet. The proceeds of the sale were then divided by Stevensons between the crew and the owners of the vessel in a process called "grossing".
(11) Grossing was done as follows:
(a) 5% of the gross proceeds went to the vessel's owners. From the remaining 95% of the proceeds deductions were made for:
(i) Stevenson's commission of 4%;
(ii) 2% landing charges by Newlyn Harbour;
(iii) the cost of ice and fuel and other expenses.
(b) The balance was divided so that the crew received 40% and the owners 60%.
(c) Stevensons did the calculations on "settling sheets". Stevensons made payments by cheques to the owners and individual crew members.
(d) The crew would order food for trips and pass the invoices to Stevensons to pay. Stevensons would reimburse themselves from the crew's share of the proceeds of each trip.
(12) If the sale of the catch on one trip did not cover the costs of the trip then no shares would be paid out by Stevensons to either owners or crew members.
(13) The crew members did not provide invoices for payment and none were registered for VAT.
(14) The defendants occasionally paid advances to the deceased. These would invariably be recovered from earnings on future trips.
(15) The crew provided their own oil skins, gloves, knives and bedding.
(16) The shipowners provided the vessel, fishing gear, safety equipment and consumables such as grease, paint, cleaning gear and the materials necessary for repairs to the fishing gear.
(17) The vessel was painted once a year. The defendants had the option of engaging contractors to do this work, but usually the work would be offered to the crew who would be paid an hourly rate for doing so. The paint would be provided by the owners."
- The judge went on to point out that some issues of fact were not agreed. These included: (i) the degree to which the defendants participated in running the vessel; (ii) how the "settling" was done in detail; (iii) whether Stevensons acted as agents for the crew other than for buying food; (iv) whether a crew member was obliged to turn up for each trip and whether the defendants were obliged to let him do so if he did; (v) whether the deceased worked on other vessels after joining "Margaretha Maria". As to these points, the judge recounted Mr Chope's evidence that he had originally acted as skipper, until Mr Holmes took over; that he owned the vessel with Mr Adams; that he dealt with crewing while Mr Adams dealt with financial matters; that he regarded crew as self-employed; that he asked all crew, when first engaged and before sailing for the first time, to sign a form which referred to the position in which they were to be "employed"; (in fact, Mr Chope said that he either asked the crew member to sign or filled it in at the crew member's dictation – transcript page 30); that, if there was a disagreement between him and the skipper as to crewmen engaged or what was to happen on board, he, Mr Chope, would have the final say, as also in relation to where and for how long the vessel should fish, although such issues did not arise in practice; and that "the crew were an integral part of the operation of the vessel as a fishing vessel". Mr Adams explained that the annual accounts were produced by accountants, who decided on their format, and inclined to the view that the fish belonged to the skipper and crew; if he wanted fish, he had to buy through Stevensons.
- The judge went on to examine the English authorities, including Market Investigations and Lee Ting Sang. He dealt briefly with the Scottish authorities, referring expressly only to Noble and Redman and saying that "each case turns on its particular facts" and that "Ultimately these cases do not help solve the issue in the present case".
- The judge, after reciting the submissions of the parties, analysed the position as follows:
"46. It is agreed that there is no special statutory meaning that attaches to the words "contract of service in "section 185(4)(a) of the MSA 1995. It is therefore agreed that I must approach the issue of whether the crew were engaged under "contracts of service" by reference to the tests that have been developed over the years by the English (and Scottish) cases that deal with this question. But I must also be careful to consider those tests against the particular facts of this case. The most important fact in this case is that the crew were all "share fishermen" and they worked on each fishing trip on that basis. Each trip was a separate venture financially. The crew received a proportion of the net proceeds after expenses, which included a percentage payable to the owners that was taken off the gross proceeds. However, having said that, it is important to note that it was the owners that provided nearly all the equipment for the business of fishing. They provided the vessel and all the fishing gear. The crew only provided personal foul weather gear, knives and boots and their food for the trip. Although the crew (led by the skipper) would decide precisely how, where and for how long they would fish, the basic method was dictated by the type of vessel used and the fishing equipment provided by the owners. The crew ran the risk that they might receive no remuneration on a particular trip if the proceeds of sale did not exceed the expenses, but they did not have to meet any losses incurred. Nor did they have to pay for the upkeep of the vessel or her gear. It was the owners only who decided on maintenance of the vessel and gear and how much to spend on it and when. There was some evidence that the vessel suffered from many technical problems. The crew were not in a position to resolve those difficulties; that was a matter for the owners. To that extent the crew had little opportunity to profit from sound management in the performance of their task as fishermen.
47. Having listed all those factors and considered the others on which Mr Nolan relies (self employed status for tax and National Insurance, statutory treatment of "share fishermen" as self employed for social security etc), in my view all the relevant factors are very evenly balanced in this case. Therefore I have looked again at the precise wording of section 185(4)(a) of the MSA 1995. I have asked the question: does the evidence show that each crew member was on board the vessel for each fishing trip under a contract with the owners whereby he would provide his services for that trip, under the ultimate control and direction of the shipowners and where the shipowners provide the bulk of the equipment, the investment and the management of the business of fishing?
It seems to me that the answer to that question must be "yes". In my view that is enough, despite contra indications, to conclude that, for the purposes of section 185(4)(a) of the MSA 1995, the crew were on board the vessel under "contracts of service"".
- At the end of the day, therefore, the decisive factors were the provision of services "under the ultimate control and direction of the shipowners" who provided "the bulk of the equipment, the investment and the management of he business of fishing". Earlier the judge had, however, identified as "the most important fact in this case" the fact that the deceased were share fishermen and worked each separate fishing trip on that basis. It is common ground that there was no overall contract, and so no entitlement to sickness, holiday or redundancy pay, as well as no obligation on either side to continue to work with the other on any future trip. The judge said, however, that, while the crew ran the risk of receiving no remuneration on a particular trip if the proceeds of sale did not exceed the expenses, "they did not have to meet any losses incurred".
- This last comment by the judge gives rise to the first of the points which I wish to make on his judgment. The defendants challenge the accuracy of the judge's statement as regards losses. Mr Chope's unchallenged evidence was that, in a situation where the proceeds did not cover expenses, the proceeds would be carried forward to the next trip, when the costs of both trips would be deducted, and any net balance shared out. Usually, this occurred when the first trip was cut short, but it had, very rarely, been known for a trip which lasted its intended duration not to cover fuel and direct expenses, e.g. when fish were very scarce. In such situations, the crew were effectively sharing the loss on the first trip. Since the claimants' case is that each trip involved a separate contract (of service), it seems to me, on reflection, to be no real answer to this point that the frame of reference was effectively enlarged to combine the two trips. There were still separate contracts and the loss under one was shared with the crew, by being deducted from the profit under the next.
- Nowhere in his judgment does the judge mention or address the unchallenged evidence that losses would be carried forward to the next trip in this way. This is not just a material omission (particularly, in my view, having regard to the significance attached to the sharing of losses in the Scottish and Irish authorities), it positively undermines the judge's statement that the crew "did not have to meet any losses incurred". The evidence both of Mr Tossell (as a crew member who had served on the vessel previously) and Mr Chope was that no crew member would be expected positively to disburse monies to meet a loss, if he left the boat after a loss-making voyage. Mr Chope said that he had heard of that situation arising (transcript page 50B), and his reasons for not expecting any contribution appear to have been a mix of understanding for someone who had done his best and should not be "penalised" and of pragmatism. The former reason given may be said to point towards a relationship of master and servant, with the master carrying the risk, while the latter is neutral. Mr Chope's after the event rationalisation of the situation is however in my view of limited weight. More important by far is the fact that, in the ordinary course of events, under which it was practical to enforce sharing of losses, that is where the crew member returned for the next trip, such sharing would occur.
- In the Scottish cases in which the sharing of losses is emphasised as important, M'Naughton, Parker v. Walker and Noble, the common practice was to carry forward losses against a future profitable voyage, and, in Parker v.Walker, differing evidence was given on the question whether there was any liability to pay them in any other situation. When the judge in Parker v. Walker, spoke of "joint adventure with all its legal consequences of liability for loss", it appears to me (as I have said in paragraph 109 above) that he was deriving a general conclusion from the other evidence. Here too, much the same might be said, even if the liability was not enforced. Mr Tossell's and Mr Chope's evidence can hardly be regarded as establishing a custom or usage in the legal sense. But, however that may be, it is in my view (as I have said in paragraphs 109 and 116 above) wholly possible to conceive of a joint adventure, extending to the sharing net of profits and losses while a crew member continues to make trips with the same owner. Joint adventurers or partners who continue to renew their involvement may be prepared to take the (evidently very rare) risk of one of their number departing after losses, and then ceasing to meet such losses. As to the modern Irish cases, in McLoughlin, despite a finding that there was no sharing of losses, the court concluded looking at the matter overall that the relationship was one of partnership in a joint venture. Whilst I see no reason to disagree with the judge's conclusion, the present case on any view contains the additional factor of sharing of losses, by carrying them forward and setting them against profits on the next trip. Griffin (where there was, it appears, similar sharing by carrying forward of losses to be set off in the next profitable voyage) confirms my view that such sharing can and should be seen as a significant indicator of a contractual relationship between independent co-adventurers, as opposed to a contract of service.
- Secondly, there are other aspects of the arrangements regarding payment which were, in my view, material and which the judge did not identify or address in his concluding analysis. A contract of service involves the payment of a wage or other remuneration. Here, the fish caught were delivered to a fish-selling firm, Stevensons, which sold them and accounted direct to the owners and the crew for their respective net shares. That was regarded, rightly in my view, as a material factor in Parker v. Walker. It is at least consistent with this picture that, when the owners wanted fish for themselves, they bought at auction from Stevensons (although this point can be put no higher, since, whatever the relationship, owners could not simply have been allowed to take fish, thereby reducing the net profits).
- Thirdly, the evidence also showed that, while the owners and skipper had agreed on the broad 60%/40% split, the amount received by individual crew members was arranged between them and the skipper, Mr Holmes (cf e.g. Mr Chope's statement, paragraph 25). The defendants were not aware of the shares agreed among the crew until they saw Stevensons' settling sheets. As Mr Chope said: "40% of the grossing was theirs to do with what they liked"; the skipper would give him a list of those on board, with their shares, to pass on to Stevensons. These arrangements also appear to me to point away from a relationship of master and servant. The more natural analysis of them is that there was a basic business arrangement between the owners on the one hand and the skipper representing all the crew on the other, with the crew then sorting out their shares between themselves, and informing Stevensons accordingly. The position in this respect too goes further than in McLoughlin, where Costello J attached weight to the fact that the crew agreed among themselves on the split of their 50% share "in consultation with the owner". Here, the agreement was independent of the owners.
- On the other hand, the owners' internal accounting entries carry the description "wages" for the payments to crew and the owners' annual accounts showed the whole proceeds of catches, and disbursements in respect of the crew's 40% share. But these were, firstly, internal accounting entries and, secondly, company accounts, the latter being, on the evidence, left to and prepared by accountants. The crew had, so far as appears, no involvement and no knowledge in either case with regard to the way in which they were made out.
- Fourthly, what was clearly common ground between the parties was their shared understanding (accepted by the Inland Revenue) that the crew members were self-employed. They were paid gross, and were responsible for their own tax and stamp. The defendants would on request prepare "earnings sheets" for individual crew members for submission to the Revenue in this connection (cf Mr Chope's evidence at transcript page 34). Individual crew members duly prepared and submitted to the Inland Revenue accounts on that self-employed basis. The judge mentioned Mr Nolan's reliance on this factor in passing in his concluding analysis. But it seems to me a factor deserving some emphasis, particularly in a case which the judge regarded as borderline. Both in Ready Mixed Concrete and in Massey, the courts were prepared to attach weight to the parties' own expressed attitude in a contractual statement regarding their respective status, and the parties' attitude also seems to me relevant, even in the case of post-contractual conduct, to throw light on the true nature of an unwritten relationship. A like factor was again present and identified in Parker v. Walker. It clearly outweighs any significance, if any, to be attached to the printed words, "Employed as ….", appearing on the forms completed in respect of individual crew members. Those forms were, in fact, inherited with the vessel, though the crew would not have known this. More importantly, "Employed as [mate]" is (as the statutory regulations cited above illustrate) a phrase not inconsistent with self-employment. Above all, the bare form is less significant by far than the parties' actual understanding and operation of the relationship in practice.
- Fifthly, turning to the factors which the judge did at the end of the day find significant, the first was control. I start by observing that in McLoughlin Costello J regarded even "the large measure of control" that there existed as arising "as much from the operations being carried on as from the contractual relationship" and as "a factor which is consistent both with the existence of a contract of service and an agreement for partnership". In the present case, also, the findings and evidence on this subject seem to me to fit readily with the concept of a partnership or joint venture between independent contractors. The starting point is that the crew, through the skipper, themselves had considerable day to day control: see the judge's summary of the agreed points nos. (6) to (9) above. Secondly, point no. (6) above - the skipper's choice of crew, liaising with the owners, and a crew member's right to do no more than put forward a substitute for consideration, if he himself could not sail - is what one would expect in such a venture, bearing in mind the joint interests of all concerned. Again, I note in parenthesis that in McLoughlin Costello J regarded the fact that the defendant selected other crew members, although on the evidence after consulting the other crew, as consistent with either relationship. Further, in the present case the evidence of Mr Tossell (page 5F) and Mr Chope (pages 43H-44A) indicated that both the owners and the skipper were regarded as having a right to veto any particular proposed crew member. When it came to leaving the vessel, Mr Tossell said that he had first spoken to the skipper, who had been quite understanding and they had shaken hands, and had then given notice to the owners. Again, I do not regard that as pointing towards a contract of service as opposed to an independent relationship. As to point no. (9) – the skippers' and crew's lack of entitlement to send along substitutes (although they might well put forward a substitute for approval) – it would of course have been a considerable pointer towards an independent relationship, had this been permitted, but I do not regard the fact that it was not permitted a positive pointer towards a relationship of master and servant. It was a perfectly natural limitation in a contract under which the owners were on any view exposing their vessel to the competence of third parties. For the same reason, points nos. (7) and (8) above – the skipper's general day to day management of the vessel, power to decide when the vessel went to sea and where and for how long they would fish and power to instruct other crew members at sea – also reconcile equally well with an analysis other than that of a contract of service. I would only add that the judge in summarising these points did not mention another piece of unchallenged evidence, given both by Mr Chope (witness statement paragraph 25) and by Mr Tossell (a former crew-member) (transcript pages 14-15), to the effect that the crew would, as one would expect, all contribute on such matters, with the skipper having the last word if there was disagreement.
- Reliance is placed by Mrs Blackburn on Mr Chope's answers to the effect that, if the skipper was doing something untoward or a problem arose between crew and skipper, it would not be unusual and he would expect a crew member concerned to report back to him. In answer to a question whether "the ultimate responsibility for their [the crew's] safety would lie" with him as owner, he also replied: "Being the skipper in charge of the vessel and if a crew member voiced his objection as to the way things worked, the only one he could voice his objection to would be myself as managing the vessel. So as the pecking order goes, I am the one above the skipper, yes." The hierarchical flavour given by the use of the words "pecking order" is of some assistance to the claimants' case. But I do not think that it carries matters sufficiently far. Basically, Mr Chope's statements do no more than reflect the position as one would expect it to be, whether the legal relationship was one of master-servant or independent co-adventurers. The vessel's participation was essential. The owners were no more bound beyond the particular trip than were the individual crew members. The owners would be bound to be involved, concerned and influential, bearing in mind their common interests in the well-being of all concerned and the success of every trip, whatever the legal relation.
- Sixthly, the other factor on which the judge laid especial weight was the relative disparity of the parties' contributions to "the equipment, the investment and the management of the business of fishing". The difference in financial outlay was clearly very large indeed, with the owners contributing their vessel and her equipment, while the crew contributed only their labour, and their own oil skins, gloves, knives, bedding and (through Stevensons and deductions from their shares) their food. However, the existence of a partnership does not in any way depend on relative evaluation of the parties' contributions in financial terms: see paragraph 104 above. Further, as the present tragic case shows, the crew's contribution in terms of risk could in a very real sense prove far greater than any that the owners made. In saying this, I recognise that those employed at sea or elsewhere under a contract of service often also hazard their life or health on their master's business.
- As to the suggested disparity in contribution to the management of the business, I again see the matter differently to the judge. The business of maintaining and insuring a fishing vessel is no doubt onerous. But much of the vessel's day to day management, including ensuring the readiness of fishing gear for the next voyage was undertaken by the skipper: see point no. (7); and, more importantly, the business of fishing is pre-eminently the catching of fish. The judge's remarks quoted in paragraph 133 above (to the effect that, although the crew would decide how, where and for how long to fish, the "basic method" of fishing was dictated by the vessel's type and equipment) fail, I think, to give proper value to the personal experience, skill, care and effort involved of all the crew (a) in navigating a small vessel in safety under sometimes very difficult conditions and (b) in estimating the whereabouts of and then locating and catching fish at sea. The type of vessel and equipment were no doubt (unemphasised) features of all the cases in which share fishermen were regarded by the Scottish and Irish courts as partners in a joint venture.
- The difficulty on an appeal such as the present lies in determining whether the judge has erred in approach or in the factors taken into account, or has exceeded the considerable margin of judgment given to him, on the issue whether the relationship was one of master and servant, or a relationship between independent contracting parties or joint adventurers. I have come to the conclusion that he did. In summary, the judge did not identify the sharing of losses which the relationship involved. He therefore failed to take into account a material consideration. The position regarding sales through an independent firm, Stevensons, and the arrangements for sharing among crew, also deserved emphasis in any overall evaluation. So too did the clear common understanding and treatment of the relationship as one of self-employment. Turning to the factors which the judge did stress, those of control, investment and management were, firstly, less clear and, above all, less weighty than the judge thought.
- Since the judge did not in my view identify all the relevant considerations, or give appropriate weight to those that he did identify, it is necessary, having now done so, to undertake a fresh balancing exercise taking all of them into account. I have no doubt that on any such balancing exercise, the first four factors which I have identified considerably outweigh any inference in favour of a contract of service, which might still arise from the last two factors, and that the only proper conclusion from them is that each crew member had an independent relationship with the defendants, not a relationship of service.
- For these reasons, I have come to the conclusion that the judge's determination of the second issue was wrong, and that the defendants' appeal upon it succeeds, on the basis that the relationship between each of the deceased and the owners of the "Margaretha Maria" did not involve a contract of service within the meaning of s.185(4) of the Merchant Shipping Act 1995.
THORPE LJ: I agree.
Order: Appellant's appeal dismissed; the respondent's cross-appeal allowed; permission to appeal to the House of Lords refused.
(Order not part of approved judgment)