Stack v Ajar-Tec Limited

A contract of service or a contract for services may exist even where the parties have not agreed the amount of remuneration. The absence of an agreed sum is relevant, but it is not legally decisive. The court must distinguish between uncertainty about the amount payable and the absence of any agreement, express or implied, that remuneration will be paid. Where an employment tribunal treats the absence of an agreed amount as fatal to the existence of a contract, it misdirects itself in law. The question must then be reconsidered on the facts, including whether the individual was entitled to remuneration under an express or implied agreement.

The claimant was a shareholder and director of the respondent company. He claimed that he was also an employee and worker and brought claims for unfair dismissal and sums allegedly due. Following a pre-hearing review, the Employment Tribunal held that he was neither an employee nor a worker because no contract or agreed remuneration had been established. The claimant appealed, arguing that the tribunal had wrongly treated the absence of an agreed amount of remuneration as necessarily preventing any contract of service or contract for services.

1. Appeal allowed. The Employment Tribunal had materially misdirected itself by treating the absence of agreement about the amount of remuneration as decisive of whether a contract existed.
2. A contract of service or a contract for services can in principle exist even though the parties have not agreed the amount of remuneration. Way v Latilla, Powell v Braun and Currencies Direct Ltd v Ellis established or supported the principle that work undertaken in circumstances indicating an intention that it should be paid may give rise to an implied obligation to pay reasonable remuneration.
3. The tribunal’s finding that no agreement had been reached about the amount payable was relevant, but its statement that this was fatal to the claim showed that it had adopted the wrong legal test. The authorities did not determine whether there had been any agreement, express or implied, that remuneration would be paid at all; that was a separate factual and legal question.
4. The Employment Appeal Tribunal could not safely determine the issue from the existing findings, which presented an insufficiently coherent overall picture. The question whether, at the material times, there was a contract of service or contract for services under which the claimant was entitled to remuneration, although the amount was unfixed, was remitted for reconsideration.
5. The matter was to be reheard by a different Employment Judge because of the reasonable lack of confidence that the original judge could approach the issue with a clean slate.

• Employment Appeal Tribunal: allowed the appeal against the Employment Tribunal’s pre-hearing review decision dated 19 August 2010 and remitted the issue for rehearing before a different Employment Judge.