Upper Tribunal Tax and Chancery Chamber

UT/2023/000049 - [2024] UKUT 00233 (TCC)

Fecha: 16-May-2024

ground 1: the 2013 contract was an overarching contract of employment

ground 1: the 2013 contract was an overarching contract of employment

What the FTT decided

33.

In considering both the 2010 Contract and the 2013 Contract, the FTT began by setting out the well-known principles described by McKenna J in Ready Mixed Concrete (South East)Limited v Minister of Pensions and National Insurance [1968] 2 QB 497 (“RMC”) at page 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 its being a contract of service.

34.

These three criteria are generally referred to as mutuality of obligation, control and the “third stage”. In this case, the battleground was mutuality of obligation.

35.

In relation to the 2013 Contract, the FTT explained, at FTT[42]:

There is no dispute that the 2013 Contract is in fact a contract of employment and it is clearly intended to be one. It is headed “Employment Agreement” and clause 2.1 confirms that it is a contract of service. The key question in relation to the 2013 Contract is whether it is an overarching contract of employment (covering not only the assignments but also the gaps between assignments) or whether each assignment constitutes a separate employment.

36.

The FTT considered what features were required in the gaps between employments for the 2013 Contract to be a continuing or overarching contract of employment. The parties disagreed on whether control must exist, but the FTT found it unnecessary to determine that question, as it decided that the necessary mutuality of obligation did not exist between assignments.

37.

In terms of the obligation on Mainpay under the 2013 Contract, the FTT decided that there was an obligation on Mainpay to provide work, stating as follows, at FTT[126]-[128]:

126.

Looking at the terms of the 2013 Contract, there is little doubt that Mainpay was required to provide work. Clause 3.1 provides that Mainpay is obliged to obtain suitable assignments for the worker. In Clause 5.2, Mainpay guarantees to offer the worker a minimum of 336 hours of work a year.

127.

Based on our findings of fact, we do not accept that these contractual provisions reflect the true agreement between the parties. It is clear to us that, taking into account the circumstances known to the parties at the time of entering into the contract, it was the expectation and understanding of both parties that the workers would obtain assignments directly from the employment agencies and not from Mainpay. Whilst, as Mr Firth notes, the assignments are offered to the workers by Mainpay in the sense that Mainpay is the only entity with which the workers have a contractual relationship, we do not consider that this can be viewed as Mainpay obtaining assignments or offering work in any real sense.

128.

However, we are conscious of the warning in Arnold v Britton (Footnote: ²) that, in interpreting a contract, the factual matrix cannot override the clear words of the contract. In this case, the words of the contract are clear. We therefore accept that there is a contractual obligation on Mainpay to obtain assignments and to provide a minimum number of hours of work.

38.

HMRC seek to challenge that conclusion; we return to this below.

39.

At FTT[130]-[136], the FTT then turned to mutuality of obligation from the perspective of the workers, after having discussed the respective submissions of the parties. It stated that the only relevant provision in the 2013 Contract was Clause 3.1, which requires the worker to “consider any suitable Assignments obtained by the Company”. It rejected Mr Firth’s “tentative” suggestion that an obligation to give good faith consideration to a suitable assignment should be implied into this provision. The FTT construed Clause 3.1 against the factual background known to the parties when they entered into the contract.

40.

Mr Firth argued before the FTT that the position in this case was analogous to that in ABC News Intercontinental Inc v Gizbert [2006] All ER (D) 98 (“Gizbert”), in which mutuality was found to exist. The FTT rejected that argument at FTT[133]:

…unlike in Gizbert, although Mainpay guaranteed to offer the workers a minimum number of hours of work, there was no corresponding obligation to pay the workers in respect of those hours even if no work were offered. In these circumstances it is difficult to see on what basis there could be any corresponding obligation to accept work if it was in fact offered.

41.

The FTT’s conclusion was set out at FTT[135]:

Our conclusion therefore is that the necessary mutuality of obligation does not exist. Although Mainpay does have a contractual obligation to obtain work and to provide a minimum number of hours of work each year, there is no obligation on the workers to accept any work which may be offered. They have an absolute and unfettered discretion whether or not to do so.