Tiffin v. Lester Aldridge LLP

A person may be a partner without holding a substantial share of profits, making a substantial capital contribution, or enjoying extensive management rights. Partnership status depends on whether the parties carry on business in common with a view of profit, assessed from all the relevant features of their relationship. Contractual labels are relevant but never decisive. In an appeal from an Employment Tribunal, a finding of fact or mixed fact and law will be overturned for perversity only where the appellant shows an overwhelming case that no reasonable tribunal could have reached it. A member of a limited liability partnership is not employed by it if, assuming a conventional partnership, that person would be regarded as a partner.

The claimant, a solicitor, became a salaried partner and later a fixed share partner in a partnership which converted into the respondent limited liability partnership. He received drawings calculated by reference to a fixed share of profits, held profit points, contributed capital, had limited voting and management rights, and was treated by the parties as a member rather than an employee.

The Southampton Employment Tribunal held that he was a partner within section 1(1) of the Partnership Act 1890, and therefore was not an employee within section 230(1) of the Employment Rights Act 1996. The central issue on appeal was whether that conclusion involved an error of law or perversity.

1. Appeal dismissed. The Employment Tribunal had correctly directed itself and reached a conclusion open to it on the facts.
2. Under section 1(1) of the Partnership Act 1890, partnership requires a relationship in which persons carry on business in common with a view of profit. There is no statutory or judicial minimum level of profit entitlement, capital contribution, voting power or management participation required for partnership status.
3. The claimant’s entitlement to a fixed share of profits, profit points, a share of assets on winding up, capital contribution, voting and attendance rights, and authority to sign cheques provided sufficient material for the Tribunal to conclude that he carried on business in association with the respondent. The limited extent of those rights did not prevent partnership status.
4. The decision in M. Young Legal Associates v Zahid [2006] 1 WLR 2562 demonstrated that the absence of a direct profit link or capital contribution was not decisive. The assessment remained one of fact, informed by all the features of the agreement.
5. The description of the claimant as a fixed share partner was not determinative. The Tribunal was required to examine the true relationship, and had done so. Steckel v Ellice [1973] 1 WLR 191 was consistent with that approach.
6. For perversity, the claimant had to establish the overwhelming case described in Yeboah v Crofton [2002] IRLR 634: that no reasonable tribunal, properly applying the evidence and law, could have reached the decision. That threshold was not met.
7. Section 4(4) of the Limited Liability Partnerships Act 2000 required the status question to be approached by asking whether the claimant would be regarded as a partner in an ordinary partnership. The Tribunal had not adopted an erroneous approach.

• Employment Appeal Tribunal: dismissed the appeal from the Southampton Employment Tribunal.
• Southampton Employment Tribunal: held that the claimant was a partner under section 1(1) of the Partnership Act 1890 and not an employee under section 230(1) of the Employment Rights Act 1996.