EMPLOYMENT APPEALS TRIBUNAL
Hyper Trust Limited
UNFAIR DISMISSALS ACTS 1977 TO 2007
MINIMUM NOTICE AND TERMS OF EMPLOYMENT ACTS, 1973 TO 2005
I certify that the Tribunal
(Division of Tribunal)
Chairman: Ms. J. McGovern BL
Members: Mr. L. Tobin
Mr. M. O’Reilly
heard this case in Dublin on 24 June 2016 and 27 September 2016
Mr. Tom Mallon BL instructed by Mr. Larry Brennan, Arthur P. McLean & Co, Solicitors, 31 Parliament Street, Dublin 2
Mr Gary Compton BL instructed by Mr. Gavin Simons, Amoss Solicitors, Warrington House, Mount Street Crescent, Dublin 2
The determination of the Tribunal was as follows:-
By way of background, the claimants were formerly directors and equal shareholders in respondent company which owned and operated the Leopardstown Inn, a public house and restaurant in Stillorgan, Co. Dublin. The company was incorporated in 1975 and operated said public house since 1978. By Order of the High Court an interim examiner was appointed to the respondent in or about 22 October 2014 following a petition by the respondent grounded on affidavit sworn by DR, the second claimant. As part of the examinership process the claimants made an investment proposal to the examiner which was not accepted and ultimately both claimants ended up opposing the examinership. A Scheme of Arrangement was subsequently approved by the High Court on 10 February 2015 wherein, inter alia, the proposal for investment of a company named Borderridge Limited was accepted the effect being that the respondent came under new ownership. Further, as part of the Scheme of Arrangement no redundancies from the respondent were to take place. In these proceedings both claimants, who asserted that they were at all times employees of the respondent, seek redress for unfair dismissal from the respondent following the approval of the said Scheme of Arrangement. Some days following the Order of the High Court the claimants state that they were ordered off the Leopardstown Inn premises. It is contended on behalf of the respondent that the claimants were not employees but rather were proprietary directors with full and absolute control over the ownership and operation of the Leopardstown Inn.
Evidence on behalf of the respondent
CD gave evidence that she commenced employment as an administrator with the respondent in 2012 and shared an office with DR, the second claimant. Part of her role was to prepare wages etc for members of staff. She confirmed that both claimants received wages, they were both registered class S1 PRSI (self employed) and neither had a contract of employment. She further confirmed that both took holidays and received sick pay when appropriate. She stated that she reported to the claimants as did the other management staff in the business and the claimants “reported to themselves”. In or about October 2014 the staff were aware that there were problems in the company and it was a stressful time for everyone. She recalled being asked to prepare contracts of employment for the claimants in February 2015 but did not recall which claimant asked her to do so. No contracts were drafted up however. No contract of employment for either claimant was produced for the Tribunal.
On cross examination CD confirmed that the claimants worked six days per week. While there was a clocking in system in place it did not affect the pay of members of staff. It was put to her that there had been an alteration in the class of PRSI payable by the claimants in 2008 from A1 (employee class) to S1(self employed) she stated that she was not employed by the respondent in 2008 so was not aware of it. During the course of the examinership process CD confirmed that she was never told her role was at risk of redundancy. On the date the claimants were asked to leave the premises following the approval of the Scheme of Arrangement she was asked about pay for BR, the first claimant and was told it would be sent on to him. She heard nothing further.
This concluded the evidence of the respondent.
The claimants’ case
DR, the first claimant, gave evidence that he and his brother bought the Leopardstown Inn in 1978 and that both were shareholders of the respondent, the company named as owner of the pub. He stated that he worked full days in the pub and restaurant and was heavily involved in its administration. There was a large staff, a mix of both full time and part time persons many of whom had been with the business for years. DR stated that he was an employee of the respondent and it was his sole employment. He earned a salary of approximately €40,000 but when queried by the Tribunal confirmed that this was not his sole source of income. He further stated that he did have certain expenses paid by the respondent but by and large they were vouched. DR stated that he knew nothing about S1 or A1 PRSI and stated he reached the age of 65 in 2008.
On cross examination DR confirmed that both claimants were directors of the respondent and were in receipt of the profits from the pub. He confirmed that a considerable sum was re-invested in Newstalk Radio on behalf of the respondent which said investment was lost following the examinership process. He was questioned concerning some specific payments made by him from company accounts post the appointment of the interim examiner. He stated that any such funds were used to pay suppliers. It was put to him that this, and other examples of access to funds, would not be the actions of an employee of the company but rather someone who had total control of the business. DR stated in reply, and on numerous other occasions, that he was an employee of the company. DR was further asked whether he and his brother ‘torpedoed’ the examinership when it became apparent that another investor was being preferred he stated that he was guided by his lawyers during that process. DR denied asking CD to draw up contracts for him and his brother in February 2015. On re-examination DR stated that he co-operated fully with the examinership process and after opposing the scheme of arrangement he had no further involvement.
BR gave evidence stating that he was a director/operations manager and shareholder of the respondent and was in receipt of a salary of approximately €45,000. He stated that he was paid as an employee and received holiday pay, sick pay etc in that regard. He acknowledged his PRSI status changed in 2008 but was not aware of this at the time or why it was done. Following the Order of the High Court dated 10February 2015 he attended work as normal but was denied entrance by a security guard. He was never told that his employment was terminated and did not receive a P60 or P45. BR confirmed that he had no written contract that could be produced to the Tribunal but stated that he had one in years gone by. He indicated that he had stacks of paper work supporting his position but did not have copies of same for the Tribunal.
BR was cross examined in detail concerning a number of transactions that the respondent, he and his brother entered into over the years. BR was asked to explain an arrangement with a mobile phone operator for a mast located on the respondent’s lands and confirm who was in receipt of fees payable by the said mobile phone operator. Following much back and forth, BR eventually confirmed that he and his brother received those fees and considered it personal income albeit the “arrangement” was between the respondent and the mobile phone operator. In or about 2010 a re-zoning issue with Dun Laoghaire Rathdown County Council arose in relation to a strip of land adjacent to the Leopardstown Inn. The said strip of land is owned personally by BR and DR. BR was queried as to who had paid the legal fees associated with making representation to the Council concerning the zoning of the land and was presented with a number of invoices in this regard. BR eventually confirmed that it was the respondent who paid the said fees although the fee notes were made out to BR and/or DR personally and related to their lands as opposed to the assets of the respondent. During the course of the examinership this strip of land adjacent to the Leopardstown Inn became a feature of the process. It appears that a material part of the storage space for the Leopardstown Inn was located on the adjacent strip of land owned by BR and DR. In addition access this land affected delivery access and car-parking for the respondent. Following the examinership, and indeed during the course of the litigation, access to the storage area on the lands of BR and DR was heavily contested. It was put to BR that he considered this land to be his in the same manner he considered the Leopardtown land to be his and his brothers, and not the respondents; there was no difference. No clear response was given despite much back and forth between BR and Counsel for the Respondent and it appeared to the Tribunal that BR was not able to give a straight answer to a relatively simple question.
MON, chartered tax consultant, gave evidence. He advised that PRSI class A1 represented employee contributions whereas class S1 represented contributions of self employed persons. He referred to a July 2013 ruling from Revenue which stated that a ‘working director’ could be classified as an employee unless their shareholding was in excess. Given that both claimants were classified as S1 since 2008 he concluded that both were directors who were employees.
Submission on behalf of the Respondent
It was firstly argued that if the claimants were employees (which was denied by the respondent) their employment was terminated by operation of law i.e. the approval by the by the High Court of a Scheme of Arrangement which, it was argued, made provision for the removal of the claimants from the business as directors. The claimants were not employees therefore they were not dealt with in this regard in the Scheme of Arrangement. In the circumstances they were not dismissed by the respondent.
In reply to the argument that the claimants were employees the respondent relied on the evidence proffered by both DR and BR. It was argued that, based on this evidence, they were proprietary directors and shareholders who had such control over the business that they could not be regarded as employees in the normal sense. In this regard Counsel outlined the long standing ‘control test’ being that the essence of employment was that an employee was “subject to the command of the master as to the way which he shall do his work”. Counsel referred to number of long standing decisions in this jurisdiction together with the UK decision of Fleming v Secretary of State for Trade and Industry  IRLR 682.
Submissions on behalf of the Claimants
It was argued on behalf of the claimants that they are employees whose employment could not be terminated by operation of law but rather only by dismissal as set out in Section 1 of the Unfair Dismissals Act 1977.The concept of ‘dismissal’ under the Act is not displaced by the fact that a High Court Order was made during the course of an examinership and the Act does not make any such provision.
The fact that the claimants exercised control over the business does not of itself render them outside the protection of the Unfair Dismissal Act 1977. The “control test” is only part of the consideration to be given in determining whether or not a person is an employee. It is the claimants ‘case that they were not terminated by the facts and circumstances of the examinership but rather they were dismissed when Borderridge Limited took over as employer following the approval of the Scheme of Arrangement. The Scheme of Arrangement was modified during the course of the examinership and the scheme ultimately approved by the High Court did not provide for the termination of the claimants employment and if it had done, it would have provided for their redundancy. Counsel referred the Tribunal to a number of UK decisions detailing development of the law in relation to employee/directors including Lee v Lee’s Air Farming Ltd  AC 12,Buchan v Secretary of State for Employment; Ivey v Secretary of State for Employment  IRLR 80, Connolly v Sellers Arenascene Ltd  ICR 760, Secretary of State for Business Enterprise and Regulatory Reform v Nuefield and Howe and Secretary of State and Industry v Botrill  ICR 592.
It was submitted that in light of this UK case law, that the claimants can be shareholders and directors at the same time as being employees when all other factors are taken into consideration. A director/employee can be an employee of a company which s/he has control when the other factors consistent with employment also exist e.g, contract, sick pay, holiday pay etc.
It was submitted that in this case the evidence is that the claimants had the appropriate deductions made from their salaries in line with employees on a weekly basis, that they had implied terms of contract consistent with an employee and the mere fact that the claimants exercised control over the business was not of itself enough to displace their status as employees.
Having heard the evidence of the parties the Tribunal do not believe that the claimants were employees of the respondent for the purpose of the provisions of the Unfair Dismissals Act 1977 (as amended). While the summary of the law in the United Kingdom on behalf of the claimant is helpful in setting out what the Tribunal has to consider, in these circumstances we do not believe that the entirety of the facts and evidence proffered during the hearing support the argument that the claimants were employees. It is commonplace between the parties that there is no one factor that determines whether or not the claimants are employees and we are required to look at all of the relevant facts. It is accepted that both claimants received a salary, holiday pay, sick pay etc in the same manner as the other members of staff. Counsel relies on ‘implied terms of contract’ on behalf of the claimants presumably because no written contract exists for either although all other member of staff had contracts. The claimants had regular work hours and both state that this was their only employment. In that regard DR and BR stated in response to the Tribunal that his was not their sole income however as they availed of the profits of the business and were, inter alia, in receipt of income arising from the telephone mast on the respondent’s lands. The Tribunal had the benefit of observing both the claimants during the course of their evidence and while the claimants had no difficulty answering certain basic questions, particularly those concerning the day to day operation of the pub and restaurant, it became more difficult to comprehend the answers that related to the material and in-depth running of the business. BR in particular was quite evasive in his evidence.
Having considered the evidence and submissions of both parties the Tribunal do not believe that the claimants were employees but rather directors and shareholders with such control over the respondent that could not be considered employees. It is clear that the claimants considered the assets of the respondent to be theirs in a personal capacity and this is evidenced by the way in which they ran the business over the years, the manner in which they used the adjacent lands owned by them personally as part of the business and the manner in which they received and had access to certain funds of the business. It is also clear from the oral evidence of the claimants that, in spite of their argument that they are employees, they considered the Leopardstown Inn to be their property personally and in reality saw no difference between what they considered they owned and what the company owned. In the circumstances the Tribunal does not propose dealing with the argument that the claimants’ employment was terminated by “operation of law”.
The claims under the Unfair Dismissals Acts, 1977 to 2007 and under the Minimum Notice and Terms of Employment Acts, 1973 to 2005 fail.
Sealed with the Seal of the
Employment Appeals Tribunal