Friday, 2 February 2001

Sellars Arenascene v Connolly - C of A

1. Sellars Arenascene Ltd. v Connolly - Court of Appeal
2. Beuvale Furnishings Ltd. v Chapman - EAT


1. Sellars Arenascene Ltd. v Connolly (CA, 2.2.01)

A decision of the Court of Appeal, handed down this morning.

Issue: Is a controlling shareholder capable of being an employee, for the purpose of the unfair dismissal legislation?

The employment tribunal held that Mr Connolly was not an employee of company X (which, following a series of TUPE transfers and a change of name, became Sellars Arenascene Ltd.) because he was the controlling shareholder. In particular, he was "an accomplished and expert entrepeneur operating a number of businesses", he "retained overall control", and he "behaved as an employee but had an interest as shareholder over and above that of employee and stood to gain if the company prospered."

The Court of Appeal, upholding the decision of the EAT, overturned the employment tribunal's finding and held that Mr Connolly was an employee.

It held that, although ultimately a question of fact, the employment tribunal was clearly wrong to regard the above factors as being inconsistent with employment. Many senior employees are accomplished and expert entrepeneurs. Many senior employees have control of a company, and many senior employees stand to gain if a company prospers. These factors were not inconsistent with employment and, the tribunal having misdirected itself, the Court of Appeal thought it appropriate to substitute its own view.


2. Beauvale Furnishings Ltd. v Chapman

This case is unreported. The transcript can be found at

Beauvale Furnishings Ltd. v Chapman [29.11.2000, HHJ Reid QC]
A bold decision of the EAT on illegality of contracts of employment. The parties agreed that the employee would be 'labelled' a self-employed consultant, despite being an employee in reality. This was so the employee could continue claiming legal aid in a personal matter, and could defer payment of income tax and pay the lower class 4 NI contributions. In fact the Applicant then failed to declare his income to the revenue. The EAT held that the deliberate mislabelling as 'self-employed' tainted the contract with illegality and thus prevented him claiming unfair dismissal.

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