Verity v Nation & Anor

Whether a person is an employee depends on the substance of the whole relationship and the contemporaneous evidence, not informal labels such as director or group. A claim that two individuals jointly employed the claimant, with duties of loyalty and service owed to them, requires evidence that they operated as a partnership or firm. Where the documents instead show an unstructured group of companies and purported directors awaiting a future formal structure, they may contradict a subsisting contract of employment. An appellate court should respect a trial judge’s advantage in seeing witnesses, but must intervene where the findings are plainly wrong on the evidence.

The claimant, an architect and planning consultant, claimed unpaid salary from Robert Nation and Karl Fender. He alleged that they had orally employed him to work in London on Malaysian and other projects, initially on terms equivalent to those of the directors of their architectural practice. The defendants maintained that he had joined an informal group of companies as a director, and denied that they operated as a partnership.

The High Court found that the claimant was their employee and awarded him £388,000 plus costs. The central issue on appeal was whether the evidence established an employment contract between the claimant and the two individuals.

1. Disposition. Ward LJ delivered the leading judgment and Jonathan Parker LJ agreed. The appeal was allowed unanimously, the claimant’s claim was dismissed, and the defendants were awarded their costs in the Court of Appeal and below. Money lodged as security for costs, with accrued interest, was to be paid to the defendants’ solicitors.
2. Appellate review. The Court accepted that an appellate court should be slow to interfere with factual findings because the trial judge sees and hears the witnesses. However, where the findings are plainly wrong on the evidence, the appellate court must identify the error and substitute the correct findings. This was such a case.
3. Alleged employment by two individuals. Ward LJ held that the claimant could not be employed by Nation and Fender jointly, owing them duties of loyalty and service, unless they were in partnership and operating as a firm. The evidence showed that their architectural business operated through several companies. There was no sufficient evidence that Nation and Fender operated as a firm which could employ the claimant.
4. Evidence of the relationship. The claimant’s account of the August 1993 meeting was contradicted by the evidence concerning Fender’s movements and was not supported by the contemporary documents. More importantly, the documents showed that the claimant regarded himself as a director of an unstructured group, on parity with the other purported directors, while the participants anticipated creating a future corporate structure with formal roles and agreements. That evidence was inconsistent with a subsisting contract of employment by Nation and Fender. Parker LJ regarded the June 1994 directors’ minute as fatal to the claim because it recorded that the directors were still awaiting formal roles and status. He expressly did not rest the decision on the claimant’s dishonesty in his tax returns, although Ward LJ treated that conduct as an adverse feature.

• High Court of Justice, Queen’s Bench Division: On 25 June 1999, judgment was entered for the claimant in the sum of £388,000 with costs. The court found that he was employed by the defendants.
• Court of Appeal (Civil Division): The appeal was allowed, the High Court judgment was set aside, and the claimant’s claim was dismissed. The order included costs here and below. The decision is reported at [2000] EWCA Civ 418.