McElveen v Department for Employment & Le... Department for Employment & Le... [2013] NIIT 02377

THE INDUSTRIAL TRIBUNALS

CASE REFS: 2377/12

2378/12

CLAIMANTS: Noel Gary McElveen

Debbie Elizabeth McElveen

RESPONDENT: Department for Employment & Learning

DECISION

The unanimous decision of the tribunal is that the application by the first and second claimant, and each of them, pursuant to Article 233 of the Employment Rights (Northern Ireland) Order 1996, against the decision of the respondent not to make to the first and second claimant, or either of them, any redundancy payment and notice payment out of the National Insurance Fund is dismissed, as the tribunal was not satisfied the first and second claimant, or either of them, at the material time was an employee within the meaning of Article 3 of the Employment Rights (Northern Ireland) Order 1996.

Constitution of Tribunal:

Chairman (sitting alone): Mr N Drennan QC

Appearances:

The first and second claimant appeared in person and were not represented.

The respondent was represented by Mr P McAteer, Barrister-at-Law, instructed by The Departmental Solicitor’s Office.

Reasons

1.1 At the commencement of the hearing, it was agreed, and I so ordered, that the claims of the first and second claimant were to be considered together by the same tribunal, pursuant to Rule 10(2)(i) of the Industrial Tribunals Rules of Procedure, contained in Schedule 1 of the Industrial Tribunals (Constitution and Rules of Procedure) Regulations (Northern Ireland) 2005 (‘the Rules of Procedure’).

1.2 The first and second claimant each gave oral evidence to the tribunal. The respondent called no evidence. In addition, the first and second claimant and the respondent’s representative each made oral submissions to the tribunal at the conclusion of the hearing. In reaching my decision, I also had regard to the documents contained in the agreed trial bundle, to which I was referred during the course of the hearing by the first and second claimant and the respondent’s representative.

1.3 The first claimant was a controlling shareholder and director of Communications Systems (GMCE) Limited (‘the Company’), which was incorporated as a limited company on or about 1 July 1999. The second claimant was also a director and minority shareholder of the Company. On 23 February 2012 the Company went into liquidation.

1.4 The first and second claimant each made an application on 8 March 2012 to the respondent (‘Redundancy Payments Service’) for a redundancy payment and notice pay to be paid by the respondent out of the Northern Ireland National Insurance Fund to each of them. By letters dated 28 August 2012, the respondent refused the application of the first and second claimant, and each of them, on the grounds that it was not satisfied that the first and second claimant, or either of them, at the material time were employees, as defined by Article 3 of the Employment Rights (Northern Ireland) Order 1996 (‘the 1996 Order’). Following further correspondence between the parties, to which further reference shall be made elsewhere in this decision, on 27 November 2012, the first and second claimant each presented a claim to the tribunal, pursuant to Article 233 of the 1996 Order, that the respondent had failed to make the said payment and which claim, it was agreed, was, in essence, an ‘appeal’ of the respondent’s decision.

1.5 The amounts claimed by the first and second claimant, and each of them, on foot of their said applications to the respondent for a redundancy payment and notice pay and/or the calculation of the sums by the first and second claimant, were not agreed by the respondent. In the circumstances, it was agreed, if it was necessary to do so, in light of the tribunal’s decision on liability, that there would be a remedy hearing to determine the payments, if any, to be paid by the respondent to the claimants.

1.6 There was no dispute, for the purposes of the 1996 Order the company was, at the material time, insolvent. It was further not disputed that, in determining the said ‘appeal’ the main focus of the hearing related to whether, at the material time, the first and second claimant, or either of them, were an employee, as defined by Article 3 of the 1996 Order which states as follows:-

“(1) In this Order ‘employee’ means an individual who has entered into or works under (or, where the employee’s employment has ceased, worked under) a contract of employment.

(2) In this Order ‘contract of employment’ means a contract of service or apprenticeship, whether express or implied, and (if it is expressed) whether oral or in writing.

…

(4) In this Order, ‘employer’, in relation to an employee … means a person by whom the employee … is (or, where the employment has ceased, was) employed.

(5) In this Order ‘employment’ –

(a) in relation to an employee, means … under a contract of employment, and

…

‘employee’ shall be construed accordingly.”

2.1 The following case law has particular relevance to the determination of the issues in this matter, namely:-

“(i) Clark v Clark Construction Initiatives Ltd and Utility Consultancy Services Ltd [2008] IRLR 364, which is a decision of the Employment Appeal Tribunal

(ii) Secretary of State for Business Enterprise and Regulatory Reform v Neufeld [2009] IRLR 475, which is a decision of the Court of Appeal in England & Wales.

(iii) Autoclenz Ltd v Belcher [2011] UKSC 41, which is a decision of the Supreme Court.”

In the absence of any relevant decision of the Northern Ireland Court of Appeal, and since the relevant legislation in Great Britain and Northern Ireland is in similar terms, I was satisfied that the guidance set out in the above case law should be followed by this tribunal.

2.2 In Clark, Elias P set out the following guidance:-

“96 Support for the notion that the tribunal’s are entitled to refuse to recognise the contract as a contract of employment if it fails to reflect the true nature of the relationship is supported by the fact that the guidance in Bottrill twice emphasises the potential relevance of whether the conduct of the parties is consistent with the contract. That is not to say that any minor breach of the terms will invalidate the contract. However, if the controlling shareholder acts in a manner which suggests that the contract is being set at nought, or is treated as no more than an irrelevant piece of paper, then the tribunal will be entitled to refuse to give effect to it.

98 How should a tribunal approach the task of determining whether the contract of employment should be given effect or not? We would suggest that a consideration of the following factors, whilst not exhaustive, may be of assistance:

(1) Where there is a contract ostensibly in place, the onus is on the party seeking to deny its effect to satisfy the Court that it is not what it appears to be. This is particularly so where the individual has paid tax and national insurance as an employee; he has on the face of it earned the right to take advantage of the benefits which employees may derive from such payments.

(2) The mere fact that the individual has a controlling shareholding does not of itself prevent a contract of employment arising. Nor does the fact that he in practice is able to exercise real or sole control over what the company does (Lee).

(3) Similarly, the fact that he is an entrepreneur, or has built the company up, or would profit from its success, will not be factors militating against a finding that there is a contract in place. Indeed, any controlling shareholder will inevitably benefit from the company’s success, as will many employees with share option schemes (Arascene).

(4) If the conduct of the parties is in accordance with the contract that would be a strong pointer towards the contract being valid and binding. For example, this would be so if the individual works the hours stipulated or does not take more than the stipulated holidays.

(5) Conversely, if the conduct of the parties is either inconsistent with the contract (in the sense described in Para 96) or in certain key areas where one might expect it to be governed by the contract is in fact not so governed, that would be a factor, and potentially a very important one, militating against a finding that the controlling shareholder is in reality an employee.

(6) In that context, the assertion that there is a genuine contract will be undermined if the terms have not been identified or reduced into writing (Fleming). This will be powerful evidence that the contract was not really intended to regulate the relationship in any way.

(7) The fact that the individual takes loans from the company or guarantees its debt could exceptionally have some relevance in analysing the true nature of the relationship, but in most cases such factors are unlikely carry any weight. There is nothing intrinsically inconsistent in a person who is an employee doing these things. Indeed, in many small companies it will be necessary for the controlling shareholder personally to have to give bank guarantees precisely because the company assets are small and no funding will be forthcoming without them. It would wholly undermine the Lee approach if this were to be sufficient to deny the controlling shareholder the right to enter into a contract of employment.

(8) Although the Courts have said that the fact of there being a controlling shareholding is always relevant and may be decisive, that does not mean that the fact alone will ever justify a tribunal in finding that there was no contract in place. That would be to apply the Buchan test which has been decisively rejected. The fact that there is a controlling shareholding is what may raise doubts as to whether that individual is truly an employee, but of itself that fact alone does not resolve those doubts one way or another.”

In the Neufeld case, Rimmer LJ stated in his judgment:-

“36 As to the circumstances in which the contract might be regarded as a sham, the classic case will be that described by Diplock LJ in Snook v London & West Riding Investments [1967] 2 QB 786, at 802:-

‘As regards the contention of the plaintiff that the transactions … were a ‘sham’, it is, I think, necessary to consider what, if any, legal concept is involved in the use of the popular and pejorative word. I apprehend that if it has any meaning in law, it means acts done or documents executed by parties to the ‘sham’ which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create … but one thing, I think, is clear in legal principle, morality and the authorities ( … ), that for acts for documents to be a ‘sham’ with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create legal rights and obligations which they give the appearance of creating. No unexpressed intention of a ‘shammer’ affect the rights of a party whom he deceived.’.

37 In most cases in which there arises a question as to whether the claimed employment contract is a ‘sham’, there will be what purports to be a former written contract, or at least a board minute or memorandum purporting to evidence or record the contract: a ‘shammer’ is hardly likely to rest his case on the claim that his contract was an oral one. An enquiry into whether any purported contract does amount to a ‘sham’ does not limit the court or tribunal to a consideration of the evidence as at the time of its making. It will usually also be highly material to see what the company on the one hand and the shareholder/director on the other have actually done under the purported contract: that will be likely to shed light on its genuineness or otherwise. In principle, however, a similar problem could arise with the alleged employment contract as an oral one, for it might be said in response that the basis on which such a contract is alleged is a mere pretence and is false.

… .”

“76 In his judgment on the appeal to the appeal tribunal, Elias J reviewed the authorities and cited the guidance given by this court in Bottrill. He referred to Connolly (as a case in which the employment tribunal ‘had been unduly swayed by the single feature of the controlling shareholding’), Gladwell and Nesbitt. Elias J then suggested three circumstances in which it may be legitimate for a tribunal or court not to recognise what is on its face a legitimate employment contract. First, the exceptional case in which the company is itself a ‘sham’ (which we understand to mean the case in which it is regarded simply as the alter ego of the individual). Second, where the contract was entered into for an ulterior purpose, for example to secure some statutory payment from the Secretary of State. Third, where the parties do not conduct their relationship in accordance with the contract. This will either be because they never intended to and the purported contract was a sham in the sense of Diplock LJ’s description in Snook v London & West Riding Investments [1967] 2 QB 786, at 801; or because the relationship has ceased to reflect the contractual terms. The latter type of case is the one that the Bottrill guidance had in mind in Price emphasising the potential relevance of whether the conduct of the parties is consistent with the contract.

77 We respectfully agree with Elias J’s summary of the types of cases in which the court or tribunal may find on the facts that the purported contract is not a genuine contract. But, as we have said, that type of issue does not arise under either appeal before us, we received no argument on it and we were not invited to attempt to provide general guidance on it. We propose, therefore, to say no more about Elias J’s suggested category save two things. First, we would not wish to be taken as saying that there may never be other factual circumstances in which a conclusion of ‘sham’ might be made. Second, an investigation of how the parties have conducted themselves under the purported contract may prove different things … .”

“88 We respectfully agree with the essence of the factors referred to by Elias J in Paragraph 98 of his judgment although we add a comment on four of them. Mr Tally criticised his first factor as amounting to a suggestion that the mere production of a written contract purporting to be a contract of employment will shift to the opposing party the burden of proving that it was not a genuine such contract. We doubt if Elias J was intending to refer to a legal burden. In cases where the putative employee is asserting the existence of an employment contract, it will be for him to prove it; and, as we have indicated, the mere production of what purports to be a written service agreement may by itself be insufficient to prove the case sought to be made. If the putative employee’s assertion is challenged the Court or tribunal will need to be satisfied that the document is a true reflection of the claimed employment relationship, for which purpose it will be relevant to know what the parties have done under it. The putative employee may, therefore, have to do rather more than simply produce the contract itself, or else a board minute or memorandum purporting to record his employment.

89 We consider that Elias J’s sixth factor may perhaps have put a little too high the potentially negative effect of the terms of the contract not having been reduced into writing. This will obviously be an important consideration but if the parties’ conduct under the claimed contract points convincingly to the conclusion that there was a true contract of employment, we would not wish tribunals to seize too readily on the absence of a written agreement as justifying the rejection of the claim. In both cases under appeal there was no written service agreement, but the Employment Judges appear to have no doubt that the parties’ conduct proved a genuine employment relationship.

90 As for Elias J’s seventh and eighth factors, we say no more than we regard them as saying essentially what we have said above in our ‘never say never’ paragraph.”

2.3 Both the Clarke and Neufeld cases were primarily concerned, on their particular facts, with the issue which arises when a controlling shareholder asserts that he is an employee. However, I am satisfied the principles, which emerge from those two cases, are also relevant in a situation, like the present case, in which there is dispute regarding the legal effect of a purported contract of employment, between a company and someone who is not a major shareholder. The Autoclenz case arose in the context of a dispute as to whether individuals were workers within the meaning of the National Minimum Wage Regulations 1999 and the Working Time Regulations 1998 and the correct approach to written contracts in an employment context where there is a dispute as to the genuineness of a written term. In the case, the Supreme Court (Lord Clarke gave the judgment of the Court) agreed that the Employment Tribunal, on the particular facts of the case, had been entitled to disregard the terms included in the written agreement between the parties, on the basis that the documents did not reflect what was actually agreed between the parties. In his judgment, Lord Clarke emphasised that, in the employment context, the Courts must be alive to the possibility that written documentation might not accurately reflect the reality of the relationship between the parties. For example, employers may include terms aimed at avoiding a particular statutory result, even where such terms do not reflect the real relationship. Where one party to an employment contract seeks to challenge the genuineness of the terms there is no need to show an intention to mislead anyone; it is enough that the written term does not represent the intentions or expectation of the parties; and the question in every case is what was the true agreement between the parties. To do so, he emphasised that the tribunal would have to examine all the relevant evidence, which would include the written term itself, read in the context of the whole agreement, as well as evidence of how the parties conducted themselves in practice and what their expectation of each other were.

3.1 Insofar as relevant and material for the determination of the first claimant’s claim, I made the following findings of fact, as set out in the following sub-paragraphs.

3.2 The first claimant made a claim to the respondent for redundancy payment and notice payment out of the National Insurance Fund on 23 February 2012. In the application form sent to the respondent, the first claimant acknowledged that he had been a sole trader from 1995 – 1999. Significantly, he enclosed with the said form, inter alia, a statement of main terms and conditions of employment, to which further reference will be set out below.

3.3 By letter dated 28 August 2012, the respondent stated:-

“ … having considered the information provided in your information provided in your application with that acquired from the Insolvency Practitioner, James B Kennedy, Companies House, and HMRC, the Department is not satisfied that you were an employee of Communication Systems (GMCE) Ltd as defined by Article 3 of the Employment Rights (Northern Ireland) Order 1996.

Specifically, but not exclusively, the Department notes that you claim to have been an employee of [sic] since 1995. Your National Insurance Contribution report showed that you declared a salary and paid Class 2, self-employed contributions for the period 1995 – 1999 up to and including 2000/2001. You have provided a purported contract of employment to support your claim. This contract relates to your period of self-employment and therefore the Department is of the opinion that this document did not reflect your relationship with the business after incorporation.

… .”

3.4 In an e-mail dated 27 November 2012, the first claimant, in response to the respondent’s letter, stated, inter alia:-

“ … my claim was rejected by the Department on the ground that my NI report showed that I had drawn a salary and had been paying Class 2 National Insurance Contributions as well. I was making Class 2 contributions because I was a sole trader and was therefore deemed to be self-employed. The company was incorporated in 1999 and I no longer needed to make these contributions as I was paying PAYE and NIC through the company.

At the time of filling out my RP1 I was unaware that I needed to distinguish between when I physically started working for Communication Systems and when I was deemed an employee in 2000 after incorporation of the company.

The Department also claim that my contract of employment related to the period of self-employment and was not changed to reflect my position with the company after incorporation. The agreement between myself, Gary McElveen trading as Communication Systems and Communications Systems (GMCE) Ltd included a clause that the Transfer Regulations applied to the transfer of business with regard to the employees … we were a small engineering company and did not have the knowledge or expertise necessary in dealing with contracts of employment pre and post-incorporation correctly.

… I did not believe a distinction should have been made between when I physically started to work for Communication Systems and when I became a paid employee. I believe my start date on my RP1 should have been 2000 and not 1995 as I stated and I now wish to have this amended.”

3.5 The Department, by letter dated 7 December 2012, confirmed his decision, as set out previously, should stand.

In the letter the respondent stated, inter alia:-

“ … in our letter of 28^th of August we drew your attention to the fact that you claimed to have been an employee of Communication Systems (GMCE) Ltd since 1995. This information was recorded on your RP1 redundancy application, your RP3 directory enquiries form and stated in your purported contract of employment which you provided in support of your application. We explained that your National Insurance Contributions report however showed that from 1995/1996 up to and including 2000/2001 you had in fact Class 2A (self-employed) contributions. Further, records obtained from Companies House affirmed that Communication Systems (GMCE) Ltd was incorporated on 1^st of July 1999, on which date you became a director of the now incorporated business. Your NIC report however shows that from 1^st of August 1999 to 31^st of March 2000 you continued to pay Class 2A (self-employed) contributions you could not therefore have been both self-employed and an employee of Communication Systems (GMCE) Ltd. It is the Department’s view that the purported contract of employment submitted with your application did not, as inferred, reflect your employment relationship with the company nor do we believe that it was designed to regulate your relationship with the company. On that basis we consider your contract of employment to have been a sham … .”

3.6 The contract of employment, enclosed with the application to the Department and referred to above, and in the said correspondence between the parties, purported to be a statement of main terms and conditions of employment between Communication Systems, as employer and Gary McElveen, as employee and purported to be signed by Gary McElveen on 1 October 1995.

In his direct evidence to the tribunal, the first claimant confirmed to the tribunal it was his signature on the document and had been signed by him on the date stated. It was only, in the course of cross-examination, the first claimant admitted that this was not correct; and that the document had only been signed, in fact, by him in or about February 2012, in order to enclose with his application to the Department. He accepted that at no time prior to cross-examination had he admitted to the respondent or to the tribunal the document was not as he had purported it to be, when making his application.

3.7 I am not satisfied that the first claimant on 1 October 1995 or at any time thereafter signed a statement of main terms and conditions of employment when he was trading as Communication Systems as a sole trader. As a sole trader I have little doubt that his employees may have been required to sign a statement similar to the said statement enclosed with the first claimant’s application to the Department. As a sole trader, the first claimant could never have been an employee and the said statement of main terms and conditions would not have been required therefore to be signed by him. The first claimant did not enter into a director’s service agreement with the company, upon incorporation or any other contract of employment with the company, nor was there any memorandum of such an agreement. I am satisfied the first claimant, when he decided to make his application to the respondent, found in or about February 2012, a standard statement of main terms and conditions of employment used for employees at some earlier date and signed the statement in or about February 2012, as if he had signed it on 1 October 1995. At all times he knew this was untrue and it was clearly done by him to obtain payment from the National Insurance Fund. I do not accept, in the circumstances, his explanation that this was, in essence, a copy of what he had previously signed; not least because I do not accept that he ever signed such a document but also because the truth about the document and his signature on it only emerged during the course of cross-examination. The first claimant had numerous opportunities, prior to the tribunal hearing and during the course of cross-examination to state the truth about the said document and how and when it came to be signed. He knowingly decided not to do so until he was forced to reveal the truth during the course of cross-examination. I do not accept this experienced businessman, who had become a director and majority shareholder of the company, was in any way confused or was the victim of some misunderstanding.

I am further satisfied his remuneration, as a director, was properly accounted for in the company accounts as that of a director and not as an employee. He did not make National Insurance Contributions as an employee following the incorporation of the company. Indeed the first claimant accepted, in evidence, he could produce no evidence to show he was an employee of the company at the material time. He further accepted the terms in the said statement relating to, for example, hours worked, holidays, etc were not applicable to him either as a sole trader or as a director.

4.1 Insofar as relevant and material for the determination of the second claimant’s claim, I make the following findings of fact, as set out in the following sub-paragraphs.

4.2 The second claimant made a claim to the respondent for redundancy payment and notice payment out of the National Insurance Fund on 23 February 2012. In the application form sent to the respondent, the second claimant significantly enclosed with the said form, inter alia, a statement of main terms and conditions of employment, to which further reference will be set out below.

4.3 By letter dated 28 August 2012, the respondent stated:-

““Having considered the information provided in your information provided in your application with that acquired from the Insolvency Practitioner, James B Kennedy, Companies House, and HMRC, the Department is not satisfied that you were an employee of Communication Systems (GMCE) Ltd as defined by Article 3 of the Employment Rights (Northern Ireland) Order 1996.

Specifically, but not exclusively, the Department notes that you claim to have been an employee of [sic] since 1998. Your National Insurance Contribution report showed that you were in receipt of Incapacity Benefit during the period 1998 to 2000, at a time when you claim to have been an employee.

You have provided a purported contract of employment to support your claim. This contract relates to a period prior to the incorporation of the business and therefore the Department is of the opinion that this document did not reflect your relationship with the business post incorporation. It is also noted that the contract on which you wish to rely states your job title as Engineer, which contradicts your claim form in which you confirm you job title is Company Secretary … .”

4.4 In an e-mail dated 27 November 2012, the second claimant stated, inter alia:-

“ …

(1) My National Insurance Contribution report showed that I was in receipt of Incapacity Benefit during the period 1998 to 2000. My husband started trading as Communication Systems in 1995 and I went to the office to help him with clerical and administrative work. However I suffered badly from depression following the birth of my daughter and was unable to work a large part of the time. It wasn’t until the company became incorporated that I was put on the payroll and earned a salary. At the time of filling in my RP1 I was not aware that a distinction should be made between when I actually started working to help my husband and when I became a paid employee.

(2) Contract of employment. When submitting my claim to the Department for Employment & Learning I was asked to submit a copy of my contract of employment. When my husband first started his business he was advised to provide employees with a statement of main terms and conditions of employment. He used a contract from his previous employment and the names of employees and start dates were changed to suit. I worked at as the Office Administrator and not as an Engineer. My contract wrongly states my job description as Engineer. All contracts were worded the same and mine was not changed to reflect that I was not an Engineer [tribunal’s emphasis]. The company was incorporated in 1999 but the contracts of employment were never changed to reflect this. The company was a small engineering firm and we had no expertise and knowledge in these sort of matters. The agreement between Gary McElveen trading as Communication Systems and Communication Systems (GMCE) Ltd included a clause that the Transfer Regulations applied to the transfer of the business with regards to the employees.

…

I did not realise a distinction should have been made between when I physically started to work for Communication Systems and when I became a paid employee. I believe my start date on my RP1 should have been 2000 and not 1998 as I stated and I now wish to have this amended. … .”

4.5 The Department, by letter dated 7 December 2012, confirmed its decision, as previously stated, should stand. In the letter the respondent stated, inter alia:-

“ … in your RP1 redundancy application, you stated that you commenced employment with Communication Systems (GMCE) Ltd on 1^st of May 1998, a fact which appeared to be supported in you purported contract of employment. Records obtained from Companies House however affirm that Communication Systems (GMCE) Ltd was not incorporated until 1^st of July 1999. In your e-mail of 27^th of November you acknowledged that you provided your husband with clerical and administrative support from 1995 when he started trading as Communication Systems. The Department can only assume that this was unpaid or voluntary work since you state it was not until the former business became incorporated that you were put on the payroll and earned a salary, ie 1^st of July 1999. That being the case, it is unclear how you could have viewed yourself as an employee prior to the incorporation of your husband’s business?

On 1^st of July 1999 you became Director/Secretary of the former business, Communication Systems. In your RP1 however you sought to include a period of continuous period dating back to 1^st of May 1998 when, as your National Insurance Contributions report illustrates, you were in receipt of Incapacity Benefit, ie not working. In your e-mail you state that you were unaware that a distinction should be made between when you actually started working to assist our husband and when you became an employee. However, the information obtained by the Department indicates that you were not working but in receipt of Incapacity Benefit. The Department does not accept your explanation for your confusion on the basis that you were not an employee of Communication Systems (GMCE) Ltd between 1^st of May 1998 and 30^th of June 1999 and indeed not working for a period during that time. The Department therefore cannot conceive how there could have been any confusion about when you became an employee.

I have also reviewed your purported contract of employment and consider it to be a ‘sham’, ie it does not reflect your alleged employment relationship with Communication Systems (GMCE) Ltd, it does not appear to have been constructed or agreed in order to regulate an employment relationship with the company and it contains a number of inconsistencies which are directly contradicted in your RP1 redundancy application, RP3 employee status enquiry and from information obtained from Companies House. … .”

4.6 The contract of employment, enclosed with the application to the Department, and referred to above in the said correspondence between the parties, purported to be a statement of main terms and conditions of employment between Communication Systems, as employer and Debbie McElveen, as employee and signed by Debbie McElveen on 1 May 1998.

In her direct evidence to the tribunal, the second claimant, initially, in her evidence, suggested this was a document signed by her on 1 May 1998; but she then accepted she had got confused in giving her evidence, and accepted it was in fact only signed by her in February 2012, in order to enclose with the application to the Department. However, she maintained she had signed a similar document on 1 May 1998 and this was, in essence, merely a copy of what she had previously signed. She accepted that at no time, prior to the tribunal hearing, she had informed the Department the document sent to it by her was not as it purported to be. She maintained, in evidence, the document signed by her in 1998 had the job title of Engineer scored out; but yet could give no explanation why, in the e-mail dated 27 November 2012, referred to previously, to the Department, she had expressly stated her contract had not been changed to reflect the fact she was not an Engineer. She accepted that, prior to 1 May 1998, she had not had a contract of employment with Communication Systems, albeit she had, on occasion, done some unpaid office work. She could provide no credible evidence why she believed she had originally signed the statement on 1 May 1998, other than this date was somehow ‘in her head’. She accepted that the relevant record showed she was on Incapacity Benefit from 22 March 1998 until 15 January 2000 and that she did not receive any wages during this period as an employee of Communication Systems. In such circumstances, she could give no explanation why she would have entered into a contract of employment on 1 May 1998, other than to suggest she did not recall she had been on Incapacity Benefit for such a long period and the date of 1 May 1998 might be incorrect.

4.7 The second claimant accepted she did not sign, following incorporation of the company, any direct or service agreement, nor was there any memorandum of any such agreement. I am not satisfied the second claimant on 1 May 1998 or at any date signed the said statement of an employee of Communication Systems. She had not worked for Communication Systems prior to that date and at that time she was in receipt of Incapacity Benefit. She further accepted the terms in the said statement relating to, for example, hours worked, holidays, etc were not applicable to her either as an employee for Communication Systems, if she was ever such an employee, or as a director of the company. I have concluded the second claimant, when she decided to make her application to the respondent, found, as the first claimant did, in or about February 2012, a standard statement of main terms and conditions used for employees of Communication Systems and signed the statement at that time as if she had signed it on 1 May 1998. She knew this was untrue and it was done solely to obtain payment from the National Insurance Fund. I do not accept, in the circumstances, her explanation that all she was doing was providing, in essence, a copy of what she had previously signed; not least because I do not accept, in the circumstances, she ever signed such a document but also because at no time, prior to this hearing, had she revealed the true circumstances of the signing of the document. The date chosen by her had no basis whatsoever and indeed, when choosing it, she had clearly forgotten she was in fact on Incapacity Benefit at the relevant time. She accepted the terms on the said statement had no relevance to her in relation to her duties as a director. Also, I think it was not, without significance, that her remuneration as a director, at the time of the closure of the company, was set at £12,000.00 to enable her to pay the minimal amount of tax, if any. Her remuneration was treated correctly in the company accounts, as a director, and not as an employee who was paid employee. The second claimant was unable to produce any other evidence she was an employee of the company at the material time.

5.1 I reached the following conclusions, in light of the findings of fact made by me, the legislative provisions and the case law, referred to in the previous paragraphs of the decision, in respect of the claims of the first and second claimant.

5.2 Neither the first claimant nor the second claimant were able to produce any evidence that, at the material time, either was an employee of the company. There was no evidence that any contract of employment was entered into between the first and/or second claimant and the company. There was no director’s service agreement and/or memorandum of any such agreement entered into between either of them and the company. Indeed, both the first and second claimant, and each of them, sought to rely on a statement of main terms and conditions of employment entered into between each of them and Communication Systems, as evidence of a similar contract made between each of them and the company, as an employee, during the period when they were each directors of the company. For the reasons, set out previously, I do not accept that any such contract of employment, at any material time, was entered into between either of them, and Communication Systems and/or the company. The document produced by each of them was, in essence, a sham. Both the first and second claimant each sought to rely on the said statement in making their respective applications to the respondent for a redundancy payment and/or notice pay from the National Insurance Fund, without regard to the truth and in order to obtain monies to which they were not entitled. In doing so, each was fully aware, at all times, the statement and, in particular, the date of signature on the said statement, was not what it purported to be. Indeed, it was only during the tribunal hearing that the truth about the said document and, in particular, the signature on the document was revealed and accepted by the claimants and each of them. In light of the foregoing, neither of the first or the second claimant were credible witnesses and, in essence, they were seeking to make a false application to the respondent for relevant payments from the National Insurance Fund. Parties must realise that if they make such a false application to the Department their claims will not be successful. It is fortunate the respondent, having regard to their statutory responsibility, properly investigated the applications of the first and second claimants.

5.3 In the circumstances, I therefore concluded neither the first and second claimant, or either of them, at the material time was an employee of the company, within the meaning of Article 3 of the 1996 Order.

5.4 The application by the first and second claimant, and each of them, pursuant to Article 33 of the 1996 Order, against the decision of the respondent not to make to either of them any redundancy payment and notice payment out of the National Insurance Fund, is dismissed.

Chairman:

Date and place of hearing: 13 February 2013, Belfast

Date decision recorded in register and issued to parties:

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	Industrial Tribunals Northern Ireland Decisions
You are here: BAILII >> Databases >> Industrial Tribunals Northern Ireland Decisions >> McElveen v Department for Employment & Le... Department for Employment & Le... [2013] NIIT 02377_12IT (02 May 2013) URL: http://www.bailii.org/nie/cases/NIIT/2013/2377_12IT.html Cite as: [2013] NIIT 02377_12IT, [2013] NIIT 2377_12IT

Industrial Tribunals Northern Ireland Decisions