clr/1988/1988_1_363.pdf

(1988)On 4.10.72 thetwooriginalshareholders and soledirectorsofthe company appointed themselves employees of the company and started payingsocial insurancecountributions on theirsalaries. Bya decision of the Directorofthe company, i.e.ofthe appellant and the other original shareholder of the 50% share capital, the appellant was dismissed from hisemployment withthe company on the ground of its impending dissolution. Indeed, a few days later the company was put in liquidation, upon petition by the av^ellrint and his children. 5 The applicant, submitted an application to the Social Insurance 10 Fund for redundancy which he signed asa person employed by the company. Both theapplication forredundancy allowance submitted by himaswellasthe questionnaire whichisfilled inbythe employer were signed by the applicant and theywere both dated23rd March, 1985. Hisapplication wasrefused. ^ The claimwasdismissed on the ground thatthere didnotexistthe relationship of Master and Servant between the company and the appellant. Hence thisappeal by wayof casestated. One of the argumentsin support of the appeal wasthat the trial Court wrongly lifted the veil of incorporation of the company. 20 Held:

(1)Noquestion ofliftingtheveilofincorporation wasraised before the trial Court in thepresent case but the facts relatingto the relationoftheappellantandthecompanywereplacedbyhim before the trialCourt inhisevidenceand itison such evidencethatthe trial 25 Court made itsfindings.

(2)The findings of fact of the trial Court cannot be disputed in a case stated but itisonlytheinferences drawn from such facts, which constitutethelegalquestionplacedbefore usthatcanbe questioned.

(3)Paymentofsalaryisnottheonlycriterionforholdingthatthere 3 0 exists relationship of employer—employee. For the existence of such a relationship it has to be established that the employer can exercise control overthe work ofthe other.

(4)On the facts of this case, the inference is that nobody could exercise control overthe appellant astothe mode ofperforming his 3 5 work ordismisshim from his employment. Judgment of trial Court affirmed withcostsagainst appellant. 364 1 C.L.R. Prousl v. Redundant Employees Fund Case stated. Casestated byaJudge of the Industrial DisputesCourt relative tohisdecisionofthe2ndMay,1987inproceedingsundersections 16

(1)and 18(a) of the Termination of Employment Law, 1967 5 (Law No. 24/67 -83) instituted by Avraam K.Prousi against the Redundant Employees Fund wherebyapplicant' sapplication for thepayment of redundancy allowance was dismissed. Chr. Christofides, for the appellant. Chr. loannides, for the respondent. 10 Cur.adv. vult. A.LOIZOU P.:Thejudgment of the Court willbe delivered by Mr.Justice Sawides. . SAWIDES J.: This is an appeal by way of case stated by the Industrial Disputes Court in Case No. 93/86 in which judgment 15 wasdelivered on 2nd May, 1987. By the above case stated the following question of law was formulated by the Judge of the said Court: «Whether the Court correctly interpreted the meaning of the term 'employed' as defined bythelawinthe lightoftheconditionsand circumstances 20 of the employment and the termination of the employment of the applicant. In particular whether a natural person vested with the powers that the applicant had in the present case could be considered as an 'employee' within the meaning of the law notwithstanding thefact thathewasdeclared as 'employee'of the 25 legal person». Thefacts ofthe case asset outinthe casestatedbythe learned trialJudge are as follows: The applicant in 1958set up a partnership in equal shares with one NicosHouloudesfor themakingofilluminated signs.In 1971 30 theyturned theirpartnershipintoacompanylimitedwitha capital of £20,000.- under the name of Selas Neon Signs Co. Ltd. Originally the shares belonged 50% to each one of the two said shareholders. Ata later stage the applicant transferred to his two childred 8,000shares,4,000 toeach one of them and he kept for 35 himself 2,000 shares. At the same time he secured an authorization from his children to administer at his absolute discretion their shares and represent them at the Board of 365 S a w i d e s J. Prousl v. Redundant Employees Fund

(1988)Directors of the company. Infact, asfound bythe trialJudge, the applicant had the absolute control of 50% of the shares. The applicant and his partner remained the only Directors of the Company and byvirtue ofArticle 18oftheArticlesof Association eachoneofthemhadfullauthoritytoexerciseallthepowersofthe 5 company. On 4th October, 1972, the aforesaid Directors decided to be appointed as employeesofthecompany. Inconsequence ofsuch decision they started paying their contributions to the Social Insurance Fund in addition to what was paid by the company. 10 Selas Neon Light Co. Ltd was wound up by order of the District Court ofNicosia dated 19thJune, 1985,inan application filed by the applicant and his two sons. The winding up order was published in the official Gazette of the Republic on 12th July,

1. 15 On 17th January, 1985 by a decision of the Directors his employment with the company and that of his co-director were terminated on the ground of the prospective dissolution of the company. The notice given to him was not produced before the trial Court to indicate as to who signed it but in an answer to a 20 questionnaire submitted by the Social Insurance Fund to the employer such questionnaire was signed by the applicant. In answering one of the questions set out therein he stated that besides himself he also dismissed other employees mentioning four other names including that of his co-director. The applicant 25 submitted an application to the Social Insurance Fund for redundancy which he signed as a person employed by the company. Both the application for redundancy allowance submitted byhim as wellasthe questionnaire which isfilled inby the employer were signed by the applicant and they were both 30 dated 23rd March,
2. His application was refused and as a resultheappliedforremedytotheIndustrialDisputesCourtwhich dismissed hisapplication for the following reasons: 1.Theapplicant owned and/or administered 50% oftheshares of the company. **>
3. The applicant inaccordance with Article 18of theArticlesof Association could exercise all the powersof the company. 3.Besides beinga shareholder and administrator of50% of the shares of the company he was also a co-director with the other main shareholder ofthe company. 366 40 1 C.L.R. Prousl v. Redundant Employees Fund S a w i d e s J.
4. The decision of the company to offer employment to the applicant in the capacity of an employee was taken by the company with the participation of the applicant in the taking of such decision. 5
5. Atthe time when he submitted hisapplication the,company had not yet been wound up and for itswinding up an application was submitted by the applicant and histwosons due to personal differences with the other main shareholder.
6. The notice of termination of employment as wellasof other 10 relevant documents i.e. his obligation to the fund and the questionnaire which is submitted to the Fund by the employer weresigned bytheapplicantactinginadifferent capacityon each occasion.
7. Inanswer to a question contained in the questionnaire as to 15 whether he had also dismissed other employees he mentioned that he dismissed four other employees including the other main shareholder. TheCourtafter directingitsattentiontotheprovisionsofthelaw came to the conclusion that the provisions as to redundancy 20 applied onlytocasesofpersonsintheemploymentofanother and that in the circumstances of the present case the relationship of master and servant did not exist between the applicant and the company and in consequence he was not entitled to any redundancy payment. 25 Counsel for applicant submitted that once the company was employing the applicant, paid its share of contribution to the SocialInsurance Fundcorrespondingtothesalaryofthe applicant and the applicant was also contributing as an employee of the company the relationship of employer and employee existed 30 under the provisions of s.
8. Such contributions, counsel added, had been paid continuously since 1972 and, therefore, the relationship of employer and employee that existed between the company and the applicant could not now be disputed. «Employer» within the meaning of s.2 of Law 24/67 is not the 35 Director of a company but the company itself. In the present case, counsel argued, the Court cannot lifttheveilof corporation inorder tofindouttherelationship between theapplicantand the company. Inany event a contract ofserviceexisted inthe present case according to which the company was the employer and the 40 applicant the employee. 367 S a w i d e s J. Prousl v. Redundant Employees Fund

(1988)Counsel for respondent, on theother hand,submitted thatthe position of a Directorin circumstances like those of the applicant could notcoincide with thatof an employee. The definition of an 'employee' or 'employed person' is given under s.2 of Law 24/67 as amended by s.2 of Law 67/72 as 5 follows: «'Έργοδοτούμενος' σημαίνει π ρ ό σ ω π ο ν εργαζόμενον δι' έτερονπ ρ ό σ ω π ο νείτεδυνάμεισυμβάσεωςεργα­ σίας ή μαθητείας είτε υ π ότοιαύτας περιστάσειςεκ των ο π ο ί ω ν δύναται να συναχθή η ύπαρξις σχέσεως έργο- 10 δότου και εργοδοτουμένου, ο δε όρος 'εργοδότης' θα ερμηνεύηται α ν α λ ό γ ω ς καιθ α περιλαμβάνη την Κυβέρνησιν τηςΔημοκρατίας.» The translation in English reads as follows: «'Employee' meansanypersonwho works for anotherperson 15 either under a contractof service or apprenticeship or under such circumstances from which the existence of a relationship of employer andemployee maybededuced,and the expression 'employer' shall be construedaccordingly and shall include the Governmentof the Republic.» 20 The question which poses for consideration is whether the applicant falls within the definition of «employee». The question as to whether the relationship of employer and employee exists is always a question of fact and the facts of each particular case have to be taken into consideration. The only 25 criterion for making a person an employee of another is not the payment of asalary for services renderedby himbutalso ithasto be established that the employer can exercise control over the work of the other. In Palmers Co.Law, 21st Edition,p.522. we read thefollowing in this respect. 30 «A Director can, however, hold a salaried employment or an office in addition tothatof his directorship which may, for these purposes, make him an employee or servant, and in such a case he would enjoy any rights given to employees as 35 such » 368 1 C.L.R. Prousl v.Redundant Employees Fund SawidesJ. and hegoesonthesame page asfollows: 5 10 «For the purposes of the National Insurance (Industrial Injuries) Act 1965, a director, even though in salaried employment of the company, is not employed in insurable employment if there is nobody -and that will be the normal case - who exercises control over the manner in which he does his work. This, however, is a question of fact, and the position may be different where one director, e.g., the governing director of a private company exercises control over theotherdirectorswith respect totheirwork;inthatcase, it is thought, the other directors, if insalaried employment of the company, may well be regarded as being in insurable employment within theAct.» To a similar effect are the notions prevailing also in Greece 15 where inToussi and Stavropoulos Labour Law, 1967 at p.35 we read the following: 20 25 30 «Κριτήριον τ η ς ως ά ν ω διαστολής μεταξύ τ η ς παροχής ανεξαρτήτων υπηρεσιών καιτηςειδικώς υπό της κοινωνικής νομοθεσίας προστατευόμενης συμβάσεως εργασίας αποτελεί ηπροσωπική εξάρτησις τ ο υ εργαζομένου από τονεργοδότην, ήτοι τ ο δικαίωμα τ ο υ εργοδότου .προς διεύθυνσιν και εποπτείαν της εργασίας τ ο υ μισθωτούκαι η αντίστοιχος υποχρέωσις τ ο υ τελευταίου τ ο ύ τ ο υ να υπάκουηειςτ α ς οδηγίαςτ ο υ εργοδότου.» «The testtodistinguish between rendering services and the contract for service, which is specially protected by social legislation is the personal dependence of the servant on his employer, i.e. the right of the employer to manage and supervise the work and the corresponding obligation of the servant to obey the instructions given by his emloyers». And in the footnote at p.36 reference is made to the French authorities totheeffect thatthenotionof dependency inacontract of employment does not emanate solely from the fact that a 35 person works for a third person but mainly from the obligation of the employee to work in accordance with the orders and directions of the employer. No question of lifting the veil of corporation was raised before the trial Court in the present case but the facts relating to the 369 S a w i d e s J. Prousl v. Redundant Employees Fund

(1988)relation of the application and the company were placed by him before the trial Court in hisevidence, and itison such evidence thatthetrialCourtmadeitsfindings.Thefindingsoffact ofthetrial Court cannot be disputed in a case stated but it is only the inferences drawn from such facts and which constitute the legal question placed before usthatcan be questioned. 5 Theapplicantthough contributingtotheSocialInsurance Fund asan employee wasnot an employee inthestrictsense ofthe law because though he was paid a salary on the basis of a decision taken by him and his co-director nobody could exercise control 10 over him as to the mode of performing his work or dismiss him from his employment. > Bearing in mind the fact thatthe legal relationship of employer and employee did not exist in the present case the Court rightly cametotheconclusion thattheapplicantwasnotapersonentitled 15 to redundancy payment under the provisions of the law. Therefore, ouranswertothequestion submitted bythetrial Court is that in the circumstances of the case the applicant was not an «employee» withinthe definition bythe lawintheemployment of 9 f l another. Inthe resultthejudgment ofthetrialCourtisaffirmed withcosts againsttheappellant and thecaseisremittedbacktothe Industrial DisputesCourt for any further directions, if necessary. Order accordingly. Costsagainstappellant 25 370 \