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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Ferguson v John Dawson & Partners (Contractors) Ltd.  EWCA Civ 7 (22 July 1976)
Cite as:  1 WLR 1213,  WLR 1213,  EWCA Civ 7
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THE COURT OF APPEAL
(From: Mr. Justice Boreham - Leeds)
B e f o r e :
LORD JUSTICE LAWTON
LORD JUSTICE BROWNE
| MICHAEL JOSEPH FERGUSON
|JOHN DAWSON & PARTNERS (CONTRACTORS) LIMITED
Room 392, Royal Courts of Justice, and 2 New Square, Lincoln's Inn, London, W.C.2)
(instructed by Messrs. Ward Bowie, Agents for Messrs. John King & Co., York)
appeared on behalf of the Appellants (Defendants).
Mr. ROY BELDAM, Q.C. and Mr, ROGER HUNT
(instructed by Messrs. Crombie, Wilkinson & Robinson, York)
appeared on behalf of the Respondent (Plaintiff).
Crown Copyright ©
LORD JUSTICE MEGAW: On 19th April, 1972, the plaintiff, Mr. Michael Joseph Ferguson, fell some 15 feet from a flat roof on which he was working. He suffered serious injuries. He claimed damages for breach of statutory duty from the defendants, John Dawson & Partners (Contractors) Ltd. The action was heard by Mr. Justice Boreham in the Crown Court at Leeds. On 28th July, 1975, the learned judge gave judgment for the plaintiff for £30,387.88, including interest; The defendants appeal on issues as to liability. There is no appeal as to the amount of damages.
The facts of the accident are not in dispute. The defendants were contractors who had undertaken building operations for the extension of a shop building in Walmgate, York. The work had involved the use of scaffolding erected on a flat roof. The scaffolding, after that part of the work had been finished, was taken down. The day after it had been taken down the plaintiff was ordered by Mr, Murray, the defendants' site agent, to remove some 12 or 14 scaffold boards which had been left on the flat roof. There was also some rubble on the roof. The plaintiff was to throw the scaffold boards over the edge of the flat roof to the ground below. He had thrown down 2 or 3 boards. When he was engaged in throwing down another board, he stumbled and fell off the flat roof. There was no guard rail on the flat roof.
Regulation 28 (1) of the Construction (Working Places) Regulations, 1966, so far as is relevant, provides:
"Guard rails and toe-boards at working platforms and places. Every side of a working platform or working place, being a side thereof from which a person is liable to fall a distance of more than 6 feet 6 inches, shall,.., be provided with a suitable guard rail or guard rails of adequate strength to a height of between 3 feet and 3 feet 9 inches above the platform or place,..."
Regulation 3 (1) (a), so far as is relevant, reads:
"It shall be the duty of every contractor, and every employer of workmen, who is undertaking any of the operations or works to which these Regulations apply - (a) to comply with such of the requirements of the following Regulations as affect him or any workman employed by him, that is to say, Regulations 6 to 23, 25, 30, 31, 32, 36 and 38 and, in so far as they relate to the falling or slipping of persons, Regulations 24, 26, 27, 28, 29, 33, 34 and 35...."
The learned judge held, contrary to the defendants' submissions:
(i) that the plaintiff was employed by the defendants so that the defendants owed to him the statutory duty comprised in regulation 28 (1); and
(ii) that the place where the plaintiff was working when the accident happened, the flat roof, was a "working place" within regulation 28 (1).
The defendants appeal on each of those issues, I propose to deal first, out of logical order, with the second of those issues. The defendants have at all times conceded that this flat roof in all its characteristics except one would be a working place within the regulation. The one essential characteristic which is said to be missing is the length of time for which the place was going to be used by the plaintiff for the purposes of the work which he had been required to do. The authorities Gill v. Humberstone (1963) 1 Weekly Law Reports 929, a decision of the House of lords, and Kelly v. Pierhead Ltd. (1967) 1 Weekly Law Reports 65 and Boynton v. Willment (1971) 1 Weekly Law Reports 1625, decisions of this Court, say that a necessary characteristic of a working place is that it is to be used for work for "an appreciable time". The defendants say that the intended use here, namely the removal from the roof and the throwing to the ground of 12 or 14 scaffold boards, did not involve work at this place, on the flat roof, for "an appreciable time" The judge held on the evidence that that work would have taken about 10 or 15 minutes. The judge, in error, thought that the plaintiff's instructions had included also the removal of rubble from the roof. But in my judgment that mistake does not matter. In any ordinary use of the word "appreciable", which word is accepted by both parties as being the relevant adjective, the 10 or 15 minutes required for the plaintiff's intended work was an appreciable time, I do not find it necessary to consider the further submission by Mr. Beldam for the plaintiff that the evidence indicates that there must have been a substantial period of time during which work was being carried out, though not by the plaintiff himself, on this flat roof on the previous day and also on the morning of the accident. Mr. Popplewell submits that the plaintiff cannot rely upon such work by other persons to whom no duty may have been owed by the defendants. But the 10 or 15 minutes is an appreciable time. The appeal on that issue fails.
I turn to the other issue. Was the plaintiff employed by the defendants? For the plaintiff it is submitted that he was employed by the defendants under a contract of service. For the defendants it is contended that the contract was a contract for services, and therefore the defendants were not under a statutory duty to him to provide a guard for the working place. For if it were a contract for services the plaintiff would not have been "employed" by the defendants; and in the circumstances of this accident regulation 3 (1) (a) would not have brought regulation 28 (1) into effect so as to impose on the defendants a duty towards the plaintiff. Regulation 28 (1) is brought into operation only in relation to "the falling or slipping of persons" (which this accident was) so far as the requirements of that regulation "affect....any workman employed by him": "him", here, being the defendants. Regulation 3 (1) (b) has a wider scope as regards the persons who are under the duty; but it is confined to "the falling of materials and articles".
It is conceded by the defendants that if the plaintiff was employed under a contract of service, they were, subject only to the issue as to "appreciable time", under a duty to the plaintiff; they failed to carry out that duty; and that failure was the cause of the accident. But, say the defendants, the plaintiff was employed under a contract for services: he was "self-employed": he owed a salutatory duty to himself to take the statutory precautions (Smith. v. Wimpey Bros. (1972) 2 Queen's Bench 329). It was for him, under the regulations, not for the defendants, to ensure that the guard rail was erected. The defendants were under no such duty.
What is the basis for that contention? The judge accepted the evidence given by Mr. Murray, the defendants' site agent, as to the circumstances in which the plaintiff came to work for the defendants in January, 1972, some three months before the accident happened. The evidence was simply this: the plaintiff came with four other Irishmen, already working for the defendants, and he asked, or perhaps one of his friends asked, if he could "come along". Mr.Murray's evidence is:
"I said he could start on Monday and that was it. But I did inform him there were no cards; we were purely working as a lump labour force".
Mr. Ferguson gave a false name, Goff. That was the name by which he was known to Mr. Murray. That was the name in which he signed at least some receipts for the moneys paid to him weekly -referred to by Mr. Murray in evidence as "his wages". The evidence showed that, as was no doubt intended as a feature of the so-called "lump", the defendants did not make deductions in respect of income tax from the weekly payments to the plaintiff; nor did they make any payments in respect of insurance contributions. They did not have his insurance card, nor his tax form, known as P.45. It is fair to the defendants to say that this engagement of the plaintiff, in January, 1972, whatever its legal effect, was made some months before the provisions of section 28 of the Finance Act, 1971, came into effect. When those provisions came into force on 1st April, 1972, the defendants thereafter, up to the time of the accident, deducted 30 per cent, from the sums due to the plaintiff, since he did not have a certificate, as specified in the Act, entitling him to exemption from P.A.Y.E. deductions.
In the circumstances, although neither party has raised, or wishes to raise, any issue as to possible illegality — arising in particular out of the judge's reference to the plaintiff's use of a false name in conjunction with the facilities afforded by "the lump" as being "a thoroughly dishonest device" for the purpose of evading his tax liabilities — we thought it right to raise the question on our own initiative. However, I think Mr. Beldam is justified in his submission that, however suspicious the facts may appear - and they are indeed gravely suspicious - it would not be right for this Court to hold affirmatively that there was here dishonesty which would affect the contract, whatever it was, with illegality. Mr. Beldam stresses that the plaintiff has not been given the opportunity to answer any questions suggesting such dishonesty. He was not cross-examined on that topic. The defendants did not seek to raise it. The judge asked no questions about it. In those circumstances we did not think it necessary to consider further arguments which Mr. Beldam would have wished to present, if the Court had held that there was here illegality affecting the contract, to the effect that in the circumstances such illegality of the contract or dishonesty of the plaintiff ought not to affect the plaintiff's right of recovery for a breach of statutory duty by the defendants, even though the defendants were themselves innocent of any complicity in the dishonesty and illegality. Moreover, if dishonesty and illegality were to be an issue, it would have been for consideration whether questions of possible complicity by the defendants might not also have been relevant to any decision as to the legal consequences. That question, again, was not raised with any witness, and it would be wrong, on the material which is available, that the defendants should be held, or assumed, to have been themselves dishonest, or to have connived at dishonesty of the plaintiff.
I return to the question of the plaintiff's status: was he employed under a contract of service or a contract for services?
The defendants' argument is largely founded on the passage in Mr. Murray's evidence which I have quoted already, and on the judge's exposition (not based on anything specifically contained in the evidence) of the meaning of that passage. The judge as a result of that evidence, rejecting completely the plaintiff's evidence to a different effect, held that the plaintiff "regarded himself as working on the lump". The judge then says (at page 36/F of the transcript of the judgment): "I am satisfied that the plaintiff and the defendants regarded the plaintiff as 'self-employed labour only sub-contractor' and in this there were advantages for each side". The judge then summarises those advantages, which included, for the defendants, escaping liability for payment of Selective Employment Tax in respect of the plaintiff; and for the plaintiff, evading, as the judge thought, his liability for income tax.
The defendants say that the judge has thus held that the contract is to be treated as though it contained an express term by which both parties had agreed that the plaintiff's relationship to the defendants - his status in the work which he would do on the defendants' behalf - would be "a self-employed labour-only sub-contractor". There are no other contractual terms, the defendants say: or, at least, no admissible evidence of any other contractual terms. That, say the defendants, is the end of this case; it is the end of any claim by the plaintiff in respect of breach of statutory duty by the defendants; for by agreement between the parties - the only-agreement between them - the plaintiff was self-employed. If he was self-employed, say the defendants, he was not employed by the defendants. So regulation 3 (1) (a) did not put the defendants under a regulation 28 statutory duty to the plaintiff to see that guard rails were erected at the working place. That duty was the plaintiff's own duty.
The judge rejected that argument. He said (I quote from the transcript of the judgment at page 38/F): "For the plaintiff it is contended that I must look at the realities of the situation and not to the form alone, and particularly not alone to the label that was put upon the plaintiff by both plaintiff and defendant, for it is contended that the form may be, and in this case is, a mere facade; whether or not the plaintiff regarded himself, whether or not the defendants regarded him, as 'self-employed labour only contractor', may be a matter, a serious matter, to be taken into consideration, but it is by no means conclusive, and the question remains whether in reality the relationship of master and servant existed".
The judge then considered various authorities and in particular the judgment of Mr. Justice MacKenna in Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance (1968) 2 Queen's Bench 497. Applying the tests and criteria suggested in that case to the realities of the plaintiff's employment as, in the judge's view, they had emerged in evidence in this case, the learned judge arrived at the following conclusion (I read from page 44/B of the transcript of the judgment):
"I accept what the parties accept, namely, the label, as a guide and no more. I regard the concept of 'the Lump' in the circumstances of the present case as no more than a device which each side regarded as being capable of being put to his own advantage in a manner that I have attempted to describe earlier in this judgment, but which in reality did not affect the relationship of the parties or the performance of the substance of the contract between them".
The judge was in my opinion right in his approach and in his conclusion.
Certainly it had not crossed Mr. Murray's mind that by reason of anything he had said he had altered the obligations which the defendants would have had for the safety of workmen on their site, as compared with what those obligations would have been apart from his reference to "the lump". In cross-examination, Mr. Murray seems to have had no hesitation in accepting that he (on behalf of the defendants) was responsible for providing scaffold guard rails and toe boards and that sort of thing for the safety of labourers on the site. But, of course, Mr. Murray may have been mistaken about the legal effect of the words which he used.
The defendants, as I have said, contend that the contract which governed the legal relationship between the plaintiff and the defendants for the three months up to the time of the accident was a single-term contract. The single term, derived from Mr. Murray's words "I did inform him that there were no cards, we were purely working as a lump labour force", was that the plaintiff's status vis-a-vis the defendants was to be, or was to be deemed to be, "a self-employed labour-only sub-contractor".
I shall assume for present purposes, though counsel for the plaintiff was not disposed to accept the assumption, that this is a correct interpretation of the intended, and understood, meaning of the Delphic words which were spoken by Mr. Murray and tacitly accepted by the plaintiff.
I am not, however, prepared to accept the defendants' further contention that there were no other terms of the contract. Indeed, if there were no other terms, the only conclusion in law, I think, would be the absurd conclusion that there was no contract at all during the 3 months in which the plaintiff was working for the defendants. Counsel for the defendants, when this was put to him, was disposed to accept that there must have been a contractual term as to remuneration. There must, as I think, have been many other contractual terms, also necessarily to be implied, even though they were not mentioned in the brief conversation v/hen Mr. Murray and the plaintiff agreed that the plaintiff should start work on the following Monday. This is so, whether the contract was a contract of service or for services. For example, what sort of work could the defendants require the plaintiff to do? Was he to work in his own time or during stated hours and, if so, what hours? Where could he be required to work? What notice, if any, was required by either side for the termination of the contract? What control could the defendants through Mr. Murray exercise over the order in which the plaintiff did such work as he might be required to do, or the manner of doing it?
In my opinion, the law is not so divorced from reality as to assume that the same considerations as to the ascertainment of the relevant contractual terms, if a legal analysis of the terms has to be made for any purpose, applies to a contract of the nature with which we are here concerned, the taking on of a labourer on casual application to a site agent on a building site, as applies to commercial contracts between business men, whether made orally after discussion of terms or made in writing with elaborate provisions. The terms - even the essential terms - of a contract of the present nature would often not be spoken or written at the time when the workman is taken on. They would be understood by reference to the known circumstances and the existing practices and conventions of a particular trade or a particular contractor or a particular site. Moreover, if and in so far as they were not implied, by common knowledge of what the practice was, at the time when the labourer was first taken on - the date when the legal analysis would regard the contract as being made - terms could well be added thereafter, as particular questions of the rights and obligations of the parties arose during the progress of the work. Again, to apply legal analysis, such terms would be treated as having been added, or the contract as being varied.
In this context of the implication of terms, I would refer to what was so helpfully said by Lord Wilberforce in the recent House of Lords case, Liverpool City Council v. Irwin (1976) 2 Weekly Law Reports 562, at pages 566 to 567/D. In the last paragraph of that passage, Lord Wilberforce said:
"The present case, in my opinion, represents a fourth category, or I would rather say a fourth shade on a continuous spectrum. The court here is simply concerned to establish what the contract is, the parties not having themselves fully stated the terms. In this sense the court is searching for what must be implied".
So also in this case with which we are concerned.
Accordingly I reject the defendants' contention that on legal analysis there were no contractual terms governing the relationship between the plaintiff and the defendants other than a term "self-employed labour-only sub-contractor". There were such other contractual terms. For this purpose it does not matter whether they were originally incorporated by implication when the plaintiff was taken on by Mr. Murray in January, 1972, or were added thereafter by the acceptance of the parties by conduct. What the relevant terms were was sufficiently proved by the evidence of Mr. Murray himself, the defendants' site agent, in cross-examination. His evidence, except in minor respects, is not, as the defendants suggest, merely evidence of what was done in performance of the contract. It is evidence of what the contractual rights and obligations were throughout the plaintiff's work for the defendants. True, it is not expressed in the questions and answers as being agreed terms of a contract. But I have no doubt that Mr. Murray understood, and everyone understood, that what he was being asked about was the relationship between the parties - the rights and obligations of the defendants and the workmen, including the plaintiff, which were understood and accepted to exist: that is, on legal analysis, the contractual terms.
Miller v. Whitworth (1970) Appeal Cases 583 and Schuler v. Wickham (1974) Appeal Cases 235, House of Lords authorities relied on by the defendants, are not relevant. They hold that, subject to certain exceptions, you may not look at what has been done in pursuance of a contract in order to construe that contract. There are a number of other reasons, also, why I think those decisions are not relevant here. But the main reason is that we are not here concerned with construing a contract, but with evidence as to what the terms of a contract were - the implication of terms within Lord Wilberforce' s fourth category or fourth "shade of the spectrum".
Mr. Murray accepted that he was responsible for "hiring and firing". In other words, as between the defendants and the workmen, including the plaintiff, he, Mr. Murray, could dismiss them. There is no question of his determining a contract between the defendants and a sub-contractor. He could move men from site to site, if he was so minded; and, in support of the existence of that contractual right on behalf of the defendants, he gave instances of having done so. If tools were required for the work, it was for the defendants to provide them. Again, as confirmation of that contractual obligation, Mr. Murray gave evidence of instances where the plaintiff had required tools for the work which he had been required to do, and the defendants had provided them. It was for Mr. Murray to tell the workmen, including the plaintiff, what particular work they were to do: "I tell him what to take and what to do". The centurion in St, Matthew's Gospel says to the man under him "Do this, and he doeth it". The man under him is a servant, not an independent contractor. All these things are in relation to the contractual relationships existing. "I tell him what to do" and he does it on Mr. Murray's instructions "because, when legal analysis has to be applied, it is a term of the contract that the plaintiff shall carry out the defendants' instructions what to do when they tell him to do it. The men, including the plaintiff, were employed on an hourly basis. The money paid to them would be correctly described as "a wage".
In my judgment, on the tests laid down in the authorities, all of this indicates beyond doubt that the reality of the relationship was employer and employee - a contract of service. I do not propose to lengthen this judgment by examining afresh the criteria, so fully discussed in so many cases. The judge, as I have already said, based himself on the judgment of Mr. Justice MacKenna in Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance (1968) 2 Queen's Bench 497. Another judgment which I have found very helpful is that of Mr. Justice Cooke in Market Investigations Ltd. v. Minister of Social Security (1969) 2 Queen's Bench 173.
My own view would have been that a declaration by the parties, even if it be incorporated in the contract, that the workman is to be, or is to be deemed to be, self-employed, an independent contractor, ought to be wholly disregarded - not merely treated as not being conclusive - if the remainder of the contractual terms, governing the realities of the relationship, show the relationship of employer and employee. The Roman soldier would not have been a self-employed labour-only sub-contractor because of any verbal exchange between him and the centurion when he enlisted. I find difficulty in accepting that the parties, by a mere expression of intention as to what the legal relationship should be, can in any way influence the conclusion of law as to what the relationship is. I think that it would be contrary to the public interest if that were so: for it would mean that the parties, by their own whim, by the use of a verbal formula, unrelated to the reality of the relationship, could influence the decision on whom the responsibility for the safety of workmen, as imposed by statutory regulations, should rest. But, as I shall indicate later, I am prepared for the purposes of this appeal to accept a less stringent view of the law on this point, and my decision is therefore not based on that view.
I would apply the principle laid down by Lord Justice Jenkins in Addiscombe Garden Estates Ltd. v. Crabbe (1958) 1 Queen's Bench 513. That was a case where the issue was whether the legal relationship between the parties was that of landlord and tenant or licensor and licensee. The relevant contractual document was clearly and deliberately directed towards emphasising that the relationship was that of licensor and licensee. Yet the court held that it was not. Lord Justice Jenkins, at page 527, quotes from the judgment of Lord Justice Denning in Facchini v. Bryson (1952) 1 Times Law Reports 1386, at page 1389, as follows:
"The occupation has all the features of a service tenancy, and the parties cannot by the mere words of their contract turn it into something else. Their relationship is determined by the law and not by the label which they choose to put upon it".
(Then Lord Justice Denning cited another authority and went on):
"It is not necessary to go so far as to find the document a sham. It is simply a matter of finding the true relationship of the parties. It is most important that we should adhere to this principle, or else we might find all landlords granting licences and not tenancies, and we should make a hole in the Rent Acts through which could be driven - I will not in these days say a coach and four, but an articulated vehicle".
That is the end of Lord Justice Jenkins' quotation from Lord Justice Denning. Lord Justice Jenkins himself goes on, at page 528 of the report,
"The present case, of course, has nothing to do with the Rent Acts, but the important statement of principle is that the relationship is determined by the law, and not by the label which parties choose to put on it, and that it is not necessary to go so far as to find the document a sham. It is simply a matter of ascertaining the true relationship of the parties".
So here. Counsel for the plaintiff does not assert that the reference to "the lump", whatever the words meant, was, or involved, "a sham". But, as the judgment of Lord Justice Jenkins shows, at least in certain types of case where the law has to decide whether the nature of a contract is A or B, even though the parties' expression of intention is not "a sham", it may still be properly ignored or overridden. If that is the correct approach in a case such as Addiscombe, surely the present type of case is an even stronger one for the acceptance of that approach. The parties cannot transfer a statute-imposed duty of care for safety of workmen from an employer to the workman himself merely because the parties agree, in effect, that the workman shall be deemed to be self-employed, where the true essence of the contract is, otherwise, a contract of service.
However, as I have previously indicated, I am content for the purposes of this appeal to accept, in favour of the defendants, the less stringent view which appears hitherto to have found favour in a number of cases: that is, that the expression of the parties' intention may be a relevant factor, though certainly not a conclusive factor, in deciding what is the true nature of the contract. Thus, Mr. Justice MacKenna, in the Ready Mixed Concrete case (1968) 2 Queen's Bench 497 at page 312/H, expressed it, with deliberate circumspection, in these words:
"It may be stated here that whether the relationship between the parties to the contract is that of master and servant or otherwise is a conclusion of law dependent upon the rights conferred and the duties imposed by the contract. If these are such that the relation is that of master and servant, it is irrelevant that the parties have declared it to be something else. I do not say that a declaration of this kind is always necessarily ineffective. If it were doubtful what rights and duties the parties wished to provide for, a declaration of this kind might help in resolving the doubt and fixing them in the sense required to give effect to that intention".
Lord Widgery, Chief Justice, in Global Plant Ltd. v. Secretary of State for Social Services (1972) 1 Queen's Bench 139 at page 152/D, put it more confidently, in these words:
"One must not overlook that the intention of the parties was that the relationship should be that of an independent contractor, and although the parties cannot by intention make a transaction into something which it is not, yet it is recognised that such intention is a factor for consideration in these cases".
Incidentally, although in that case the court was considering whether or not a decision of the Minister should be quashed, the decision of the court shows that the mere fact that under the contract the workman receives his remuneration without deductions of P.A.Y.E. income tax and without having his insurance card stamped by the other party does not in itself necessarily, at least, involve the conclusion in law that it is not a contract of service. For, despite these factors being present in that case, and despite the fact that the parties clearly intended that the contract should not have the legal effect of a contract of service, the Minister's decision that it did have that legal effect was upheld.
So on this basis, which for the purposes of this appeal I am prepared to assume in favour of the defendants to be correct, the parties' own expressed wish or intention may be a factor in determining what is the nature of the contract and thus in determining on whom the statutory duty is to rest. On that basis, which the learned judge accepted, how did he deal with this issue? He said (I read from page 43/G of the transcript of judgment):
"There remains the question: What matters are alleged to be inconsistent with the relationship of master and servant? First, there is the fact that the plaintiff and the defendants both regarded or labelled him as a 'self-employed labour-only contractor'. Secondly, there is the fact, and fact it is, that the plaintiff was supposed to pay his own insurance stamp as a self-employed person; that his wages were free of tax and that the obligation was upon him as upon a self-employed person to account to the Inland Revenue properly for tax. But I ask this question: When all the other indicia point to the relationship being that of master and servant, are these inconsistencies which should compel me to a contrary conclusion? It could not, as a true matter of law, be that they should so compel me".
Then the learned judge makes reference to a case in the Queen's Bench Divisional Court and goes on: "Nevertheless, should it lead me to that conclusion? I think not". Then there is a passage which I have already read but will read again: "I accept what the parties accept, namely, the label, as a guide and no more. I regard the concept of 'the lump' in the circumstances of the present case as no more than a device which each side regarded as being capable of being put to his own advantage in a manner that I have attempted to describe earlier in this judgment, but which in reality did not affect the relationship of the parties or the performance of the substance of the contract between them". "I therefore", says the judge, "arrive at the conclusion that this was in reality a contract of service and that the relationship of master and servant existed between the defendants and the plaintiff".
I agree with all the judge says in that passage.
I would dismiss the appeal.
LORD JUSTICE LAWTON: For many years past the building trade, and many outside it, have been familiar with phrases such as "working on the lump" or "working as a lump labour force". The trade union movement has expressed grave concern about this method of working Parliament has had to protect the Revenue by legislation because of the difficulties which it creates in the collection of income tax: but no attempt has been made so far by statute to forbid it. Indeed the Finance Act, 1971, recognised it as a way of working (see section 29) but put obstacles in the way of getting any fiscal benefits from it. We were told by counsel for the defendants that this appeal was the first one, as far as he knew, which called for consideration of the legal consequences to anyone alleged to have been "working as a lump labour force" in relation to any injuries sustained whilst at work and as a result of the builder who had had the benefit of his work (I use a neutral phrase deliberately) failing to use the safeguards which he would have been obliged to use under statutory regulations for the safety of any workman employed by him. What "working on the lump" or "as a lump working force" means must, of course, depend upon the evidence in each case. The trial judge, however, held that both parties in this case regarded the plaintiff as a "self-employed labour-only sub-contractor". What was the legal effect of "working as a lump working force" when, as in this case, the plaintiff was taken on (again I use a neutral phrase) as a general labourer?
As a matter of law I can see no reason why a general labourer should not offer his labour on some such terms as these:
"I do not mind what you ask me to do or where and when you ask me to do it hut you must understand that I am not going to call you master and I will not be your servant".
Many men offer their labour on some such terms as these: the jobbing gardener is familiar to us all, as are self-employed farm workers to East Anglian farmers. When working they allow themselves to be controlled by those with whom they have made a bargain. In most cases when the bargain is made nothing is said about control; but it is accepted by both parties as an implied term that the hirer will exercise control. This does not mean either in fact or, in my opinion, in law that the hired man becomes a servant.
As I understood Mr. Beldam's argument on behalf of the plaintiff, he did not challenge the general proposition which I have set out above. His case was that on the evidence the plaintiff did agree to work as the defendants' servant. Mr, Popplewell's argument was that as the object of both parties to the hiring was to avoid the relationship of master and servant and the only express words of the bargain were to this effect, the implied understandings as to which party was to exercise control did not operate to destroy the object of the bargain and to override the only express term of it.
Now one thing is clear about the plaintiff's object in offering his labour to the defendants: he did not like having income tax deducted from his earnings and wanted to avoid, maybe evade, paying any more tax than he had to do. He was no twentieth century John Philpott Curran maintaining eternal vigilance to safeguard the right of individuals to be self-employed. He must have known all about the deduction of income tax from earnings and the payment as an employed person of National Insurance contributions. For many years he had been employed as a general labourer by builders. The employer he had had for six years before he started work with the defendants had deducted tax from his earnings and had stamped his National Insurance card. After leaving this employer and returning from a short visit to Ireland the plaintiff was unemployed for about a fortnight. Pour of his friends were then working "on the lump" for the defendants. They asked their foreman, a Mr. Murray, if he would take on the plaintiff. He said he would. Soon afterwards the plaintiff came along to the defendants to start work. He spoke to Mr. Murray. Prom the trial judge's findings I infer that he told Mr. Murray that his name was G-off. There can only have been one reason for doing this, namely, to make the task of the Inland Revenue in tracing him more difficult. Had I been sitting in another jurisdiction and the plaintiff had been charged before me with some offence concerned with the fraudulent evasion of tax, I should have had no hesitation in adjudging that his giving a false name was strong evidence of intending to evade fraudulently the payment of tax. But, as Mr. Beldam pointed out, the plaintiff has not been charged with the fraudulent evasion of tax, and although the trial judge found that by giving a false name he was "a willing and dishonest party to a device to evade his tax liabilities", this had never been put to him in the witness-box so that he had never had an opportunity of meeting this allegation. With some reluctance I felt bound to accept this submission, with the result that I have had to approach the problem presented by this appeal on the basis that the plaintiff intended to order his working relations with those who accepted his offer of work so that the tax attaching to his earnings under the appropriate Acts was less than it otherwise would have been.
There can be no doubt what the defendants' intention was. Mr. Murray, whose evidence seems to have been accepted on this point, and generally, said: "But I did inform him that there were no cards; we were purely working as a lump labour force". The defendants could properly use independent sub-contractors. This is common in the building trade, and when skilled craftsmen are used, in most cases, if not all, there can be no doubt that such men are working as independent contractors. The taking on of genuine independent sub-contractors provides builders with a number of administrative and fiscal advantages. They are spared the task of accounting to the Inland Revenue for tax deducted from earnings and do not have to pay out money for the employer's contribution to National Insurance, In addition, when in 1972 the plaintiff was working for them they did not have to pay Selective Employment Tax. Clearly Mr. Murray wanted to get these benefits for the defendants.
It follows that both parties to the labour bargain which was made in this case wanted to order their affairs so as. to avoid the incidence of taxation. They could only succeed in doing so, however, if they avoided bringing into existence the relationship of master and servant. This comes about because of the provisions of section 181 of the Income and Corporation Taxes Act, 1970. As is common knowledge, assessment for tax under Schedule D, which applies to the self-employed, gives small tax advantages which those assessed under Schedule E do not enjoy. It is unnecessary to state what they are; but as every judge who has had experience of the criminal courts knows, and probably most of the public nowadays, it is not these advantages which attract many men who work "on the lump" but the opportunities for the evasion of tax which Schedule D provides. Section 181 (1) of the 1970 Act is in these terms: "Schedule E. 1. Tax under this Schedule shall be charged in respect of any office or employment on emoluments therefrom...." Section 204 (1) imposes upon any person who makes a payment of income assessable to tax under Schedule E the duty to deduct income tax. Neither the plaintiff nor the defendants wanted these provisions to apply and they could only legally and effectively bring this about by agreeing that the defendants would not employ the plaintiff. Assuming, as I must for the purposes of this appeal, that the parties were not conspiring with each other to evade tax fraudulently, this is what they thought they had done. The defendants acted as if they had attained their objective. They did not deduct tax until they were obliged to do so under the Finance Act, 1972, section 28.
If the avoidance of the relationship of master and servant was the prime object of the bargain, as I find it was from the circumstances in which it was made and the few words used, then I can see nothing in the implied terms which is inconsistent with this object. As I said at the beginning of this judgment, I can see no reason why in law a man cannot sell his labour without becoming another man's servant even though he is willing to accept control as to how, when and where he shall work. If he makes his intention not to be a servant sufficiently clear, the implications which would normally arise from implied terms do not override the prime object of the bargain. In my judgment this is just such a case.
I appreciate that there are powerful arguments for thinking that "working on the lump" is socially undesirable and that many men who do so work do not appreciate that they may be depriving themselves of safeguards which statutory regulations enact must be provided for employed men; but these considerations are not sufficiently strong to make labour bargains of this kind void as being against public policy. If in a particular case the evidence leaves the court in doubt as to what the parties had agreed, there would, no doubt, be a finding which was more in accordance with public policy than against it. That is not this case. In my judgment there is no doubt what the parties intended and it was that the plaintiff should not be a servant of the defendants. Anyway public policy is an awkward horse for a judge to ride, particularly when it wants to go in more than one direction. Maybe the law should try to save workmen from their folly; but it should not encourage them to change a status which they have freely chosen when it suits them to do so. In my judgment it would be contrary to public policy to allow a man to say he was self-employed for the purpose of avoiding the incidence of taxation but a servant for the purpose of claiming compensation. For these reasons I would allow the appeal.
In coming to this conclusion I have not overlooked the decisions in Global Plant Ltd, v. Secretary of State for Social Services (1972) 1 Queen's Bench 139, Market Investigations v. Minister of Social Security (1969) 2 Queen's Bench 173 and Construction Industry Training Board v. Labour Force ltd. (1970) 3 All England Reports 220. The first two were appeals by way of Case Stated, the last from a decision of the Industrial Tribunal. In all three cases the appellate courts were concerned with deciding whether there had been errors in law. This Court has a wider jurisdiction and is entitled to consider all the evidence given in the trial court. That I have done and to that evidence I have sought to apply the principles which were discussed in these three cases. In the enunciation of principle I found them helpful; but in the application of principle in the special jurisdiction with which these cases were concerned I got no help from them.
As I understand the law there is no single test for deciding whether a man is a servant of another. Various factors have to be considered and weighed. Control of working is one; intention is another; carrying on business on one's own account is a third. The label which the parties attach to a bargain is not to be disregarded but it is far from being conclusive. It was after considering and weighing these factors that I adjudged that the parties' intention to avoid the relationship of master and servant was the predominating and all-important factor. I was helped in this decision by Mr. Beldam's acceptance that the bargain which the parties made was not a sham.
I should add that I agree with the judgment of Lord Justice Megaw on all the remaining points in this appeal.
LORD JUSTICE BROWNE: I agree with Lord Justice Megaw that this appeal should "be dismissed. As to the "working place" point, I have nothing to add. If Lord Justice Lawton did not think differently on the "employment" point, I should be content to say that I agree with Lord Justice Megaw for the reasons he has given and for the reasons given "by Mr. Justice Boreham in the passage at pages 43-44 of the transcript of his judgment which Lord Justice Megaw has read, hut as it is I think I should state my own reasons, even though they are really the same as those already given by Lord Justice Megaw.
As I understand it, Lord Justice Lawton's reasons for holding that the relationship of master and servant did not exist between the plaintiff and the defendants are:
(a) Both parties wanted to order their affairs so as to avoid the incidence of taxation.
(b) They could only succeed in doing this if they avoided bringing into existence the relationship of master and servant between them (see Income and Corporation Taxes Act, 1970, sections 181 (1) and 204 (1).
(c) The avoidance of the relationship of master and servant was "the prime object of the bargain".
(d) If the intention not to create the relationship of master and servant is sufficiently clear from the circumstances and the express words used, implications which would normally arise from implied terms do not override the prime object of the bargain.
If Lord Justice Lawton's view is right, I think it must follow that Global Plant Ltd. v. Secretary of State for Social Services (1972) 1 Queen's Bench 139 was wrongly decided. In that case it had been expressly agreed between Global Plant and the man in question (supported by a written document) that he should be a self-employed sub-contractor, that tax should not be deducted by Global Plant, and that he should stamp his own insurance card (see pages 142/C-H and 148/E-149/D). In spite of this, Lord Widgery, Chief Justice, held that the Secretary of State was not wrong in law in holding that, having regard to the other factors in that case, the relationship was that of master and servant (see page 152/D-E, which Lord Justice Megaw has already quoted, and pages 152-155). I think it would probably also follow that the decision of the Divisional Court in Maurice Graham Ltd. v. Brunswick (1974) 16 Knight's Industrial Reports 153 was wrong, as Mr. Popplewell submitted. These two cases are not binding on this Court, but in my view they were rightly decided, supported as I think they are by earlier authorities, including Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance (1968) 2 Queen's Bench 497 and Market Investigations Ltd. v. Minister of Social Security (1969) 2 Queen's Bench 173.
Even if the "prime object of the bargain" between the plaintiff and the defendants in the present case was the avoidance of the relationship of master and servant, the question is whether they succeeded in that object. The parties cannot by a label decide the true nature of their relationship (see especially the passage from Addiscombe Garden Estates v. Crabbe (1958) 1 Queen's Bench 513 which Lord Justice Megaw has quoted). But I am afraid that I cannot agree with Lord Justice Lawton that this was the prime object of the bargain. The prime object, I think, was that the plaintiff should work as a general labourer on sites where the defendants were carrying on their business as building contractors. It is true that both parties intended that it was to be a term of the bargain that the defendants should not deduct tax and should not pay for the plaintiff's National Insurance stamps, but this was only one term. I agree with Lord Justice Megaw that there must have been - and were - other terms, and that the court must look at the arrangements as a whole to decide what the real relationship was.
On the "basis of the single sentence in Mr. Murray's evidence which Lord Justice Megaw has quoted, Mr. Justice Boreham found that "the plaintiff and the defendants regarded the plaintiff as 'self-employed labour-only sub-contractor'" (transcript of judgment page 36). I am not sure that I should have given that sentence such a wide and important effect. The only evidence about what is meant by "being on the lump" was four questions and answers in the cross-examination of the plaintiff (page 7/A-B) and three in the re-examination of Mr. Murray (page 28/E-E). The plaintiff said that it means that the employer does not deduct tax and the man stamps his own card, and Mr, Murray went no further; I doubt if either of them intended or understood what Mr. Murray said to mean more than that. But, like Lord Justice Megaw, I am prepared to assume that the judge's interpretation is right. Even making this assumption, I agree with Lord Justice Megaw that this appeal fails, for the following reasons:
(1) The term as to tax and stamps cannot have been the only term of the contract: as Lord Justice Megaw has pointed out, there would have been no contract at all unless there were other terms, tacitly understood, or "implied" in the sense explained by Lord Justice Megaw, and by Lord Wilberforce in the speech he has quoted,
(2) Miller v, Whitworth Street Estates (1970) Appeal Cases 583 and E.L. Schuler A.G. v. Wickman Machine Tool Sales Ltd. (1974) Appeal Cases 235 are irrelevant. Those cases were concerned with the construction of written contracts; the rule that "it is not legitimate to use as an aid in the construction of the contract anything which the parties said or did after it was made" (Lord Reid in Miller at page 603/E) is only a particular application of "the general rule....that extrinsic evidence is not admissible for the construction of a written contract; the parties' intentions must be ascertained, on legal principles of construction, from the words they have used" (Lord Wilberforce in Schuler at page 261/B; on this point he agreed with the other members of the House, though he dissented on another point). In the present case, the question is not one of the construction of the contract, but what were the terms of an oral and only partially expressed contract. In my opinion, the court can in such a ease take into account what was done later as a basis for inferring what was agreed when the contract was made, or as establishing later additions or variations. But I do not think this point arises in the present case, because I agree with Lord Justice Megaw that Mr. Murray's evidence related to what was understood by both parties at the time when the contract was made. I need not set out that evidence or analyse it again, because I entirely agree with Lord Justice Megaw's statement of its effect.
(3) I agree with Lord Justice Megaw and Mr. Justice Boreham that on the tests laid down by the authorities the evidence establishes beyond doubt that in reality the contract between the plaintiff and the defendants was a contract of service and their relationship was that of master and servant. The Market Investigations case (1969) 2 Queen's Bench 173 does not seem to have been cited to Mr. Justice Boreham, but I think that the application of the test suggested by Mr. Justice Cooke in that case at page 184/G-H (which I find very helpful) strongly supports his conclusion. After quoting Lord Wright, Lord Denning and the Supreme Court of the United States, Mr. Justice Cooke said that 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 is 'Yes', then the contract is a contract for services. If the answer is 'No', then the contract is a contract of service". On this test, the distinction between the plaintiff in the present case and the jobbing gardener is plain,
(4) I agree with Lord Justice Megaw that a declaration by the parties ought to be disregarded if the remainder of the contractual terms show that the reality of the relationship is one of master and servant, but, like him, I am prepared to assume that the less stringent view adopted by the authorities is right - namely, that it is a relevant, but certainly not a conclusive, factor.
(5) In my judgment, Mr. Justice Boreham directed himself rightly in law, subject to the additional test suggested by Mr. Justice Cooke to which I have referred and to (4) above; the omission of these factors makes the tests he applied more and not less favourable to the defendants. When the right tests have been applied, the conclusion to be drawn is in my view a question of fact - see Global Plant (1972) 1 Queen's Bench at pages 152-155. The appellants have entirely failed to satisfy me that Mr, Justice Boreham's conclusion, stated at pages 43-44 of his judgment, was wrong; in my judgment it was right.
As I have said, I would dismiss this appeal.
(Appeal dismissed with costs. Leave to appeal to House of Lords. Stay of execution to continue, the defendants undertaking, through counsel, to prosecute appeal, if taken, with due diligence)