Odfjell Technology (UK) Limited v The Commissioners for HMRC

We deal first with the impact of PGMOL on the conclusions drawn in Aramark and Bilfinger. PGMOL is a case which considers the traditional concepts of contracts for service (employment) v contracts of service (self-employment) in the context of football match officials who, by the very nature of their role, required almost the highest level of autonomy to take on-pitch decisions during matches.

It appears to us that in that judgment the Court has clarified the test for employment rebalancing the three limbs of what is commonly referred to as the Ready Mixed Concrete test: mutuality of obligation, control and “all other terms of the contract and the surrounding circumstances of the parties’ relationship” such that each has an equal and appropriate role to play in answering whether any particular individual is providing personal service under a contract for services with the attendant tax consequences. No longer (and their Lord/Ladyships would say never) has the identification of mutuality of obligation and control been determinative of the status of the individual; both are simply factors to be considered alongside all other relevant terms and circumstances from which an overall view is to be reached.

In that context Lord Richards observes:

“34.

Flexibility in approach to deciding whether a sufficient level of control exists is critically important, given the ways in which employment practices have evolved and continue to evolve. The days when the vast majority of the workforce attended at a particular factory, shop or office between set hours to work in highly prescriptive roles have long gone, all the more so following the Covid pandemic of 2020/21.”

At paragraph [61] he notes that whilst a sufficient element of control is essential in an employment relationship, determining sufficiency of control is a “test that can prove difficult to apply” (with which we agree) where the nature of the services provided leaves little room for intervention. The question is one to be answered by an assessment of the facts in each case and allows for a wide range of circumstances (paragraph [62]). In the context of the test for employment the range of factors to be considered, certainly historically include “the power of deciding the thing to be done, the way in which it shall be done, the means to be employed in doing it, the time when and the place where is shall be done” (quote set out in paragraph [63] taken from Ready Mixed Concrete (South East) Ltd v Minister of Pensions and Notional Insurance [1968] 2 QB 497). However “developments in the patterns of work have, … increased the cases in which some or all of these factors will be absent but where nonetheless it is appropriate to find the necessary degree of control”; such control being identified through a framework of control, a concept not capable of more precise articulation (see paragraphs [65] and [66]).

In the employment context “the requirement for control extends only so far as there is scope for it and, [but] on the other hand, … there must be some control. If only in incidental or collateral matters.” (paragraph [68]).

Lord Richards notes that the match officials are placed by the FA in a position of institutional independence and draws a parallel to the relationship between a hospital manager and a surgeon or the manager of an opera house and the conductor. However, in such situations where intervention is likely to be minimal a distinction must still be drawn between those who are employed and an independent contractor. At paragraph [71] Lord Richards also rejects the notion that whether there is sufficient control will be determined only by reference to a contractual (including theoretical) right of intervention.

As was determined in connection with identifying whether the relevant concept of control for a worker (rather than an employee) was met in Uber BV v Aslam [2021] UKSC 5 (Uber), control can be identified from the wider facts and is not limited to having a contractual right to give direct instructions. In Uber it was determined that the drivers were subject to a “second form of control” through the monitoring of rates of acceptance, ratings etc. all establishing a degree of subordination between the driver and Uber characteristic of an employment relationship (also sufficient for the purposes of concluding the drivers were workers and thereby entitled to certain protections).

Applying this broader perspective of control to the match officials it was held that they were subject to sufficient control despite an inability for PGMOL to intervene in matches because of factors such as: an ability to deny future contract appointments, fitness protocol, match day procedures, code of conduct, assessment, merit tables, coaching etc. all of which were relevant to the overall relationship albeit not within the terms of individual match contracts.

What we take from PGMOL is that in the context of determining the existence of an employment relationship control will be one factor which must be considered alongside the other indicators of employment, including mutuality of obligation or other hallmarks or features of an employment relationship. However, in the context of the HEP, in one sense at least, there is a narrower focus on the sufficiency of control necessary (assuming Aramark and Bilfinger are correct) for it to be concluded that there is a secondment-like relationship between the employee of the foreign employer and the host rather than the employee being provided as part of a subcontracted service provided by the foreign employer to the host.

In our view PGMOL encourages a broad view of the sources of control. It may be direct control i.e. through a supervisor (as might commonly be the case with the secondment of junior staff by a professional services firm to a client) but where the skills of the individual are largely autonomous through a requirement to work within a more general framework including by way of procedures or policies which determine where or when or how the secondee is assimilated into the host’s business.

As set out in paragraph 24 above the Appellant contends that the HEP applies only on an individual-by-individual basis i.e. it applies where the personal service of a named individual are placed under the day-to-day control or direction of the host and the foreign employer has the ability to substitute other employees for that named employee.

We do not accept this argument. We cannot see that the use of “the” and “that” in the context of personal service requires the seconded employees to have been selected individually by the host. Whilst personal service will always be the service of an individual we do not consider that the HEP is limited to situations where the individual is known to and named by the host. It might equally apply to individuals identified by reference to qualifications or particular skills where those individuals then work “by their own hands” in delivery of the tasks required of them and consistent with the identified skills. We do not consider that a right or de facto ability for the foreign employer to substitute one employee for another precludes a conclusion that the HEP would apply as regards each employee working within the host’s organisation for the period for which they are working under the host’s direction. What is critical therefore is simply to identify that the host directs/controls the day-to-day personal service of individuals employed by the foreign employer. For the reasons stated above a broad interpretation being given to the manner and means by which such control is exercised.

Whilst accepting that it may make little difference, Mr Hitchmough urged us (or perhaps more properly me) to reconsider my decision in Aramark and conclude that the Tribunal in Bilfinger was right that the concept of making available (limb (a) of paragraph 9) imputes some concept of control on the part of the host and that the requirement does not arise solely under limb (b) (renders). In his submission where the personal service of an individual is deployed by the foreign employer to the host and thereby made available to the host, the deployment realistically must entail the passing of day-to-day control from foreign employer to host. Put simply there could be no deployment without the passing of control in a relevant sense. Hence the focus, whether under limb (a) or (b) of paragraph 9 is to identify whether it is the foreign or host employer which exercises day-today control or direction.

Given that in both Aramark and Bilfinger it was determined that day-to-day control/direction consistent with a secondment type arrangement was required and in light of the fact that permission to appeal has been given in both cases we consider that it is more appropriate to leave it to the Upper Tribunal to consider this issue.

Mr Hitchmough pitched his submission in this regard as a nuance on the conclusions reached in both Aramark and Bilfinger that the HEP is an all or nothing provision. The framing of the conclusions in those cases was that as there was no mechanism of apportionment, the whole of the worker’s personal service must be made available and rendered to the host such that if the foreign employer retained the ability to divert the employee to other business of its own on a day-to-day basis the HEP could not make the host liable for 2ary C1 NICs. Mr Hitchmough contends that the same conclusion must follow if day-to-day control/direction is exercised by more than one putative host.

On the facts we find this issue does not arise. Certainly we can see that there would be considerable difficulty in the operation of the provision if on the facts there were two hosts as the HEP appears to be an all or nothing provision. However, as we do not need to decide the position on the facts of this case we do not so decide it.

We were provided with a document bundle of 2,032 pages.

In addition we received witness statements from:

All witnesses gave sworn oral testimony and were subject to cross-examination and re-examination. In the main there was no direct conflict of evidence between the witness statements and the evidence elicited in cross examination. Where there were nuanced differences, we preferred the oral evidence, and this is reflected in our narration of the evidence we received. We have accepted the evidence as we have recorded it.

Given the volume of evidence made available to us this judgment is, necessarily, only a summary. We have carefully considered all documents from the bundle to which we were specifically referred by the parties or to which we have referred below. In doing so we are satisfied that we have acted in accordance with the overriding objective and cognisant of the guidance provided by the Upper Tribunal in Adelekun v HMRC [2020] UKUT 244 (TCC) in which it was stated:

We have not excluded from our consideration any document to which we were referred. However, we do not refer to every document; rather we refer to those on which we rely on to form our view.

In the sections concerning the evidence of the individual witnesses we set out the salient points of evidence as derived from their witness statements and through the lens of their oral testimony which, in the main, consisted of lengthy cross-examination. As the statements ran to 63 pages and we took oral testimony over 4 days, our recitation of the witness evidence is also necessarily a summary.

In our narration for the evidence where appropriate we periodically refer to Odfjell as a generic but unattributed member of the Group, this reflects that some of the documents referred to Odfjell or Odfjell Drilling and not to a particular company and that in particular JS and WC were in many regards ambivalent to their precise contractual employer considering themselves to work for Odfjell/Odfjell Drilling.

In this appeal the burden of proof rests on the Appellant. The Appellant must establish on the balance of probabilities, by reference to the proper interpretation of the HEP and on the facts, that the personal service of the workers was not made available to the Appellant and/or rendered for the purpose of a business carried on by the Appellant, such that no liability will arise under the HEP.

If the Appellant cannot so satisfy us, then the Decision for the Relevant Period will stand. There is no dispute as to the quantum of the sums due in the event that the Appellant is a host employer.

We were provided with a single sheet prepared by Ernst Young titled “Key issues relating to the successful implementation of an offshore employment company in the context of UK NIC and PAYE”. We do not know its date. However there was a handwritten “FZE” (in the top right hand corner) which may have indicated it was received when Sharjah was being established or simply that it had been filed with paperwork concerning Sharjah.

The paper advises:

“The offshore employment company should have substance and this should exist in two distinct areas. Firstly, it should be the actual employer, ie. both contractually and functionally. Secondly, it should have commercial substance, ie, it is a business entity and commercial contracts are entered into by the relevant parties, with transfer pricing issues considered when determining the charging structure. In effect the UK-based operating company (OPCO) and the offshore employment company should have a contractor/subcontractor relationship. This facilitates OPCO involvement in work performed by the offshore employer.

The operational structure implemented should enable the offshore employment company to demonstrate the following positive factors:” [there then follows a list of the features required including an observation it was common practice that processes for recruitment, training, payroll, appraisals etc. be subcontracted to the OPCO “effectively leaving day to day administration as it is”].

A presentation from 2003 branded as Odfjell Drilling relating to the establishment of the Appellant and Singapore was also provided to us. We summarise its key relevant features.

The two Operator contracts which were performed during the Relevant Period were: the Talisman Contract dated 30 October 2003 and the BP Contract dated 8 October 2009. Both contracts incorporate, subject to specific amendments, the Leading Oil & Gas Industry Competitiveness (LOGIC) General Conditions of Contract for Well Services.

We understand that at some time in 2013 (and thus within the Relevant Period) BP transferred the operation of the Harding Platform to Taqa. The Appellant continued to provide services as under the BP Contract until losing the contract to KCA Deutag shortly after the end of the Relevant Period. We were not provided with a copy of any contract and assume simply that the terms of the BP Contract were novated to Taqa. We do not therefore consider services provided to Taqa in the Relevant Period separately.

We set out below a summary review of the relevant provisions of the November 2002 LOGIC terms:

The Talisman Contract formally incorporates the LOGIC terms subject to limited amendments.

So far as relevant the amendments are:

The remuneration schedule provides specified rates and the required numbers of staff at each grade both for onshore support personnel and separately for those working offshore. The contract recognises that crew size is not standard because of the differing levels of equipment on a platform and provides that crew size will be a matter of agreement under the contract between the Operator’s representative on the platform (known as the Drilling Supervisor) and the Appellant.

The schedule also acknowledges that additional costs associated with personnel on the Beatrice B platform would be incurred. These additional costs, we understand relate to the additional 2ary C1 NICs payable because Beatrice B was in UK territorial waters and not on UKCS. We are not concerned with Beatrice B.

The scope of work set out in Section IV of the contract provides that the Appellant shall perform Platform Drilling Operating and Maintenance rig work on Talisman-operated production platforms under Well Instruction detailed in Section VII – Administration Instructions or as verbally instructed by Talisman’s Drilling Supervisor subsequently confirmed by email. The scope also required the provision of engineering support.

Section IV sets out the operations to be carried out within the scope of work by reference to “Work Instruction” (as to which see practical explanation in paragraph 147). The Appellant is contractually required to consult with Talisman concerning “methods, procedures, supplies, materials and equipment to be used in all such operations to effect the most efficient performance feasible under all attendant circumstances and consistent with reasonable, prudent and acceptable drilling practices always provided that this provision shall not affect [the Appellant’s] status under the contract as an independent contractor.”

The Appellant is also required to maintain Talisman’s equipment through the submission by the Appellant and agreement by Talisman of maintenance procedures then to be followed subject to amendment or development at the Appellant’s cost.

Responsibility for training of all personnel is on the Appellant to ensure required levels of proficiency and that relevant permits and certificates are maintained.

Section V of the contract concerns Health, Safety and Environmental (HSE). Under that section the Appellant must comply with Talisman’s HSE Management System but also comply with its own such system; being required to collaborate with Talisman to establish and communicate interface arrangements where necessary.

The contractual procedures for the issue of work instructions are prescribed in Section VII of the contract and provide that activities to be carried out (and paid for under the contract) must be prescribed in a work instruction which will be given or confirmed in writing, and which must be accepted in writing by the Appellant.

As with the Talisman Contract the BP Contract is made under the LOGIC terms. There are no amendments made to clauses 4, 8 or 9 of the LOGIC terms.

Section II of the contract concerns people management. The terms apply to all personnel engaged in performance of the contract including onshore and offshore personnel. BP imposes certain requirements on the Appellant for incorporation into the employment obligations of working on BP Platforms. These include conditions concerning working time, rotas, role descriptions, competency requirements and assessments. BP also requires that there be alignment of the Appellant’s employment policies.

Section III concerns remuneration providing separate rates for onshore support staff as required and specified under the contract and more generally for those working offshore where rates are contractually determined by reference to nature and location of the work and the “conditions affecting the supply of supervision and labour”. We understand, in fact, that certainly for Crew, minimum rates are agreed with the unions and are consistent across all Operators.

Scope of work is provided in Section IV. Clause 1.3 reinforces that the Appellant shall provide personnel, materials, services and equipment for performance of well operations (using BP equipment) and drilling facilities management … to support BP’s operations”. The Appellant undertakes to perform all work in compliance with BP’s Drilling & Well Operations Policy. The Appellant is responsible for performing well operations and assisting BP in the co-ordination, supervision and administration of operations carried out by other contractors. BP requires the Appellant to consult with it on methods and procedures used in the drilling operations whilst continuing to ensure that the Appellant remains independent. Organisation and management of the activities performed under the contract is required to be provided through the Appellant’s onshore support operations. Subcontracting of specialist services is also envisaged in Section IV.

The scope of work also includes a section on personnel provided by the Appellant. Clause 5.1 requires the Appellant to provide a list of resumés for “all personnel that are going to work under the contract” for approval by BP prior to mobilisation. The Appellant must have a system to ensure competency of all personnel, and ensure that assigned personnel are adequately trained by reference to a training matrix. The contract also provides for a responsibility matrix where drilling and operations (platform) interfaces are prescribed as between “ops”, “BP and contractor” and “jointly”.

Section V concerns HSE. BP requires the Appellant to have a management system for HSE which meets general legal requirements and specific requirements imposed by BP and meeting the risks presented at each BP site. The Appellant is accountable to BP for compliance with management, implementing and monitoring of performance against the Appellant’s HSE policies. The interface between the Appellant’s and BP’s HSE management system is required to be documented where the degree of risk so justifies. Otherwise the Appellant is required to follow BP’s management systems.

We were provided with the Health and Safety Management interface document prepared under the contract. Part 2 of Section 1 (Core Federal HSE Expectations) and part 3 of section 2 (HSE Management System Interfacing Matrix) show a hierarchy of escalation and responsibility within each of BP and the Appellant, with lines of communication across between the organisations. The stated interface for local performance is between the Appellant’s VP Ops and BP’s Head of Operations or Well Team Leader (WTL) (all onshore positions) and for operational issues is between the STP on behalf of the Appellant and the Offshore Installation Manager (OIM) or Well Site Leader (WSL) for BP. The STP is shown below the VP Ops in the Appellant’s hierarchy and the document specifically provides:

“All Contractor personnel are responsible for the implementation of the detailed procedures and are accountable to the ODUK [STP] offshore and ultimately the ODUK VP Operations onshore.”

Part 3 of Section 2 is entitled “plan and set standards”; risk is controlled through handover, risk controls and “permit to work” (PTW) through which accountabilities are defined under BP’s Integrated Safe System of Work through the Area Authority. Change control requires the Appellant to notify BP of any significant change in, inter alia, personnel and to risk assess such a change.

Paragraph 3.4 of section 1 provides:

“[the Appellant] is responsible for ensuring that their third parties or subcontractors are aware of the site [Local Operating Management System], and that the appropriate mechanism for assessment and management interfaces are in place. Subcontractors schedule to undertake complex or unusual activities will be subject to detailed review, including clarification of competency site management and work controls by the main contractor.”d

The detail of the interface matrix of policies and procedures is then provided under an introduction which states “Contractors should insert their own [Safety Management System] documents, if applicable, that apply under each category. In the “Comments” column details should be added to show where the contractor’s document (in whole or in part) has primacy. This must be agreed with the BP contract rep.” We reviewed the detail of the matrix. The Appellant’s policies and procedures, both Group and local level, are mapped to BP policies. In the main the comments section identifies that the BP policy has primacy. This includes for drilling and well operations policy and BP’s well services operational guidance for well intervention. The Appellant’s level 4 (site specific) time optimised procedures (L4 TOPS) take precedence as operational guidance for other well service operations including drilling operations. Each company’s own systems apply for document control and specification and whilst BP’s system takes primacy for crisis/continuity management and emergency response the Appellant is expected to co-operate in casualty management. The Appellant is required to have its own substance abuse policy which meets the minimum requirements set by BP. A number of the Appellant’s health and industrial hygiene fitness policies take primacy (the Appellant’s policy is noted as provided by a third-party occupational health provider). The Appellant’s competency assurance policy, safety leadership training, prequalification of supplier also take precedence.

Under Section VIII there are no identified subcontractors appointed by the Appellant.

There are three Service Agreements entered by the Appellant one with each of the Offshore Employers.

The first agreement signed on 4 February 2004 but was effective from 1 April 2003 as between the Appellant and Singapore. The preamble to the agreement stated that Singapore had “considerable experience and expertise in the provision of the Services” the benefits of which the Appellant was “desirous of procuring”. We note that plainly Singapore did not have that stated experience. By reference to its first set of annual accounts it was incorporated for the purposes of entering the agreement and providing the services.

Pursuant to its terms Singapore agreed to provide or procure:

The remuneration clauses under the contract provide for manpower costs plus 2.5%; additionally, cost plus 5.25% for both costs specifically and directly allocable to the Appellant (other than manpower costs) and for a proportion of general costs not so specifically allocable. Invoices to be raised and payable monthly.

This agreement was subject to English law and was on terms that the relationship between the parties was that of independent contractors.

The agreement between the Appellant and Sharjah was dated 1 January 2007. It provided for similar services to those under the Singapore agreement; however, rather than being described as manpower services the principal services were described as “drilling services”. In place of the particularisation shown at paragraph 87(1)(a) above were:

“drilling services as requested by [the Appellant] and protect and promote the interest of [the Appellant] in all matters relating to the efficient operation of installations leased, owned or worked on by [the Appellant]”

The itemised services in paragraph 87(1) relating to manpower (b) – (e) were removed and there was minor amendment to reflect the language change from manpower services to drilling services. An entitlement to provide drilling services to third parties without the permission of the Appellant was introduced. Financial and administration services were no longer included.

The remuneration clause was amended to provide for a blanket 3.5% markup to actual or appportioned costs and reference to manpower costs was removed consistent with the amended wording to clause 3.

The applicable law was changed to United Arab Emirates.

The agreement with Dubai, signed on 1 April 2013 was in similar form to that of Sharjah providing for the provision of drilling services. The only relevant difference was the introduction of particularisation of drilling services to include the assumption by the Appellant of “supervision and responsibility for supervision and direction and control of personnel seconded” with Dubai retaining overall control and responsibility for those personnel. There was a dispute between the parties as to whether the “seconded personnel” in this regard were those seconded by Dubai to work with and for the Appellant onshore (see paragraph 87(1)(f) above replicated in both the Sharjah and Dubai agreements). Given our factual findings as set out below we do not consider it necessary to resolve the dispute in this regard.

As with the Services Agreements there were three consultancy agreements each signed on the same dates as the Services Agreements.

Under the consultancy agreement with Singapore the Appellant contracted to provide services under the headings: operations and human resources and logistics. The operations services included assistance in developing and interpreting the Appellant’s policies, manpower planning and documenting and handling insurance claims; and advice and best practice guidance on operational matters. The list of services under the human resources and logistics heading were extensive including recruitment, mobilisation, issue of contracts, employee handbooks etc, verification of competency, advice and guidance on best practice, making appropriate recommendations on grievance and disciplinary matters, provision of group facilities in respect of pensions, benefits etc. Together with a catch all of “such other related services as may reasonably be agreed between the Parties from time to time …”.

In substance of the items identified in 87(1) all those except the provision of the drilling crew and the daily reporting of activities undertaken by the crew (i.e. (a) and (f)) were contracted back to the Appellant.

These services were said to be provided “at the request of” and “on the express approval and instruction of” the Offshore Employer subject to a clause 13 which provided that the Agreement was not intended to create a relationship of agency between the parties.

The consideration under the agreement was a fixed monthly sum representing an estimate of the specifically and directly allocable costs plus a proportion of general costs.

As identified above the Singapore and Sharjah Consultancy Agreements provided for services to be provided “at the request of” and “on the express approval and instruction of” the Offshore Employer subject to a clause 13 which provided that the Agreement was not intended to create a relationship of agency between the parties.

Under the agreement with Sharjah the only service provided under the heading operations was the provision of technical advice and best practice guidance on operational matters. The particularisation of human and resources and logistics services was reduced though remained a broad representation of services connected with the employment of personnel. Some of the services originally under that heading were moved to new headings of health, safety and quality (particularly advice regarding competence, training and regulatory compliance), payroll and payroll accounting services. Intercompany invoicing services were introduced. As with the Singapore agreement the services were provided “at the request of” and “on the express approval and instruction of” the Offshore Employer subject to a clause 13 which provided that the Agreement was not intended to create a relationship of agency between the parties.

The monthly fee payable doubled under the Sharjah agreement.

The only material change under the Dubai agreement was that technical advice was to be provided at the request of Dubai, but HR, logistics and other services were stated to be provided under the authority provided by Dubai to carry out the tasks all still subject to clause 13 indicating no agency relationship. We saw no formal documentation of the authority.

We were provided with 12 months of invoices from Sharjah to the Appellant (April 2012 to March 2013). There were 2 per month one; for the costs under the Talisman Contract and one for costs under the BP Contract; the rubric on each was “wages etc. costs for [period] for [contract]”. The invoices were accompanied by a schedule which identified individual heads of manpower cost including wages, employer’s liability, PMI, pension costs, occupational health etc. plus markup. We did not see any apparent recharge for other costs.

We were also provided with invoices issued by the Appellant to Sharjah for the same period for “various platform costs for BP for the month of [period] as per attached spreadsheets”. The spreadsheets identified costs incurred by the Appellant in respect of each platform operated by the relevant Operator. We note that the invoicing did not appear to be in accordance with the consultancy agreement i.e. there was no £15,000 monthly charge but rather a more detailed breakdown of costs.

In the bundle there were two generic contracts of employment and various redacted, but signed, contracts.

The first generic contract of employment was for employment with Dubai. Under the terms of the contract Dubai was defined as “the Company”. There was some dispute between the parties as to the use of “the Company” within the contract. HMRC contended that the term was used not only to reference the relevant Offshore Employer but also more generically to refer to the Appellant and more widely to the Group/Odfjell Drilling. We use “the Company” in our initial narration.

So far as relevant the contract provided for:

We consider that it is reasonably apparent that “the Company” was used in this contract in a somewhat loose sense. Certainly we were provided with no rules and regulations developed or devised by Dubai that applied to those it employed; and the nomination of check-in (a very significant communication given the consequence of a failure to attend it) was not, in a practical sense at least, provided by Dubai.

We were also provided with a copy of a generic agreement for employment with the Appellant. It was in a different form to the generic Dubai contract, though unsurprisingly, was not materially different in the areas covered (largely because of the employment law requirements and good practice).

Under this agreement the Employee Handbook appears to have a greater significance than under the Dubai contract. Under this agreement the employee’s position is more generically provided for without reference to a job description. Place of work is “any worldwide location or facility … mutually agreed”. A 36-hour working week is provided for. Safety, security and accidents are managed through policies and regulations laid down by the Company. Confidentiality under this form of contract was secured through a requirement that the employee sign a confidentiality agreement. We were not provided with a generic confidentiality agreement. However we refer below to a redacted and signed agreement for an employee of Sharjah (see paragraph 115).

We note (by reference to the signed but redacted contracts provided to us) that both forms of contract were used by the Offshore Employers.

Within the material provided for specific employees we could trace employment through the Offshore Employers. One individual originally employed by Singapore on 1 May 2004 (and thereby under the Talisman Contract) had continuous employment from 28 December 2000 and was thus an employee transferred to Singapore when the Appellant was appointed by Talisman. That employee was provided with notification that with effect from 1 January 2007 their contract would transfer from Singapore to Sharjah explaining “There will be no change in any of your terms and conditions of employment and your original commencement date will transfer to the new company”.

A second employee whose contract was with Sharjah and dated May 2007 had continuous employment from 28 February 1980 (presumably on the Appellant taking on responsibility for a further Talisman platform after the original start date for the Talisman contract). This employee signed a contract in the same form as the generic contract provided for the Appellant and not that with which we were provided for Dubai. The contract for a third employee first employed on 14 December 2009 (with continuous employment from 1 May 2004) was in the form of the Dubai generic contract. However, that for a fourth for employment with Sharjah commenced 1 March 2011 (but with continuous service from 28 February 1980) had reverted to the Appellant’s generic form.

Attached to an employment contract for an employee of Sharjah using the form of contract provided as the Appellant’s generic contract was a signed confidentiality agreement. It was generic to “Odfjell Drilling” and not to Sharjah. It provided that the employee was obligated to hold any “classified information regarding to the business of Odfjell Drilling or their principal in strictest confidence”. The same form was attached to the employment contract for an employee transferring from an offshore role employed by Dubai to an onshore role employed by the Appellant on 23 July 2012.

We were provided with a copy of the Dubai Employee Handbook which was restricted to employees working in the North Sea under the Services Agreement and was dated post the Relevant Period (May 2015). The witnesses confirmed that the Handbook was representative of those in the Relevant Period though shorter and clearer.

Paragraph 1.4 describes the relationship between Dubai and the Appellant:

“[Dubai] engages [the Appellant] to act as their agent for all their employees working in the North Sea (UK). This means that it will be an employee of [the Appellant] who will contact you with regard to employment matters and logistics activities. For ease of reference, the HR department referred to throughout this handbook refers to our agent [the Appellant’s] HR department.”.

We note that this description would appear to be contrary to the terms of the Consultancy Agreement (which precluded under clause 13 the creation of an agency relationship).

The relevant code of conduct applicable to Dubai employees as per the handbook is an Odfjell Group policy applicable to the whole group and not dedicated to Dubai employees. The handbook also references other UK level policies and procedures, again not those bespoke to Dubai. All employees are encouraged to familiarise themselves with the policies and procedures held on the Odfjell Group company management system (CMS). Such policies may be set and applicable at L1 – corporate (i.e. Odfjell Group) level; L2 – Country (i.e. UK) level, L3 business unit (Odfjell Drilling – including both the Appellant and the Offshore Employers) level; and L4 – unit (Platform) level.

The Handbook provides the detailed additional (and contractual) information required by employees including detail on the terms of employment (for example regarding a second employment, sickness reporting, information regarding procedures for working offshore etc.).

We were provided with a number of job descriptions the majority of which we do not consider to be pertinent to the decision we need to take. We were not provided with a job description for the STP.

The only job description we consider relevant is that for a RM issued in 2012 and revised 2013. The job summary and responsibilities were set out:

We were referred to the following policies and procedures. We do not consider it necessary to set out their terms in detail. The witnesses all confirmed that these policies/procedures were the ones that were applied in the contexts to which they related, and we set out their evidence in this regard below.

In the table below we identify the policy/procedure and at what level within the Group it was set. Each of the documents (unless otherwise stated) was identified as an “Odfjell Drilling” document applying to both the Appellant and the Offshore Employers (and other corporate entities operating within the Odfjell Drilling division of the Group).

Accompanying the Absence management, Grievance, and Promotion Procedures were RACI Charts. As their name indicates these charts identify who will be responsible for, assist with, be consulted upon and informed of the various stages in the procedures. In each instance the identified roles were all roles within the Appellant (i.e. HR, Appellant Manager, and Appellant Senior Manager). The corresponding narrative on one occasion referred to the STP.

We were not provided with any of the policies concerning drilling operations. However, as reflected in paragraphs 80 - 83 such policies and procedures were identified within the BP health and safety interface matrix. The matrix refers to nineteen L1 policies including the Corporate Code of Conduct, HSE Policy and Risk Management and Acceptance Criteria; three L2 including COSHH, eight L3 concerning matters such as maintenance strategy, manual handling, HAVS and L4 TOPS are referred to on three occasions (though we understand that there were many hundreds of such policies – see WC evidence below).

In this section, we note that despite this case requiring us to draw very fine but critical distinctions between the Appellant and the Offshore Employers all of the witnesses commonly referred to Odfjell. Individually they unanimously accepted that both they and the employees of both the Appellant and the Offshore Employees would not distinguish between the companies and that the operations were conducted as those of Odfjell in a very generic sense or Odfjell Drilling (which consisted so far as relevant, of the Appellant and the individual Offshore Employer at the time).

We start with the evidence of JS as that enables us to introduce the framework of drilling operations on an Offshore Installation and the interaction between onshore and offshore staff.

JS worked in the oil industry for over 40 years, initially in offshore roles on Platforms operated by BP. He was employed by a variety of specialist drilling services providers. On each occasion that BP changed service provider JS’s employment transferred to the new provider. JS’s last offshore role was as an STP. The Appellant was not the specialist provider for any rig on which JS worked when he was in offshore roles.

In June 2010, JS decided to change his career direction to working onshore and joined the Appellant as an Assistant Rig Manager. He explained that becoming a RM from STP was a career option but not one suitable or interesting to every STP. He did not consider that a move from STP to RM would be considered to be a promotion. JS accepted that onshore roles gave an opportunity for career progression not available offshore. He considered any career progression for an STP wanting to remain offshore would require becoming a consultant providing advice to the Operator on drilling matters.

We found JS to be an honest witness with a breadth of knowledge to assist us in understanding the drilling services provided by the Appellant and the manner in which such services were provided in the Relevant Period.

JS, along with the other witnesses introduced an organogram which Mr Hitchmough invited us to append to our judgment. HMRC objected to our adopting the organogram (which we understand was prepared for the purposes of this dispute) on the basis that there was a risk that it assumed what we need to decide. We have not appended it because of HMRC’s concerns; however, we do set out below the relevant aspects of the document which we consider assist in an understanding of the dramatis personae in this appeal.

Whilst we did not receive direct evidence from an Operator and take the evidence from JS (and others) we understand that within the Operator there will be an onshore and an offshore team. The person responsible for a Platform appointed by the Operator will be the OIM. His responsibility is to oversee all activities on the Platform. The most senior offshore client representative responsible for drilling operations is the Well Site Leader (WSL) to whom offshore geologists and drilling engineers report.

Onshore the client team is led by the Senior Drilling Engineer to whom the Well Team Leader (WTL) reports. The onshore geologists and drilling engineers report to the WTL.

The Group also organises itself with onshore and offshore teams. Offshore the most senior individual is the STP to whom a day and a night toolpusher report (D/NTP). Beneath the D/NTP are a team of drillers, assistant drillers, derrickman, deck foreman, assistant derrickman, roughnecks and roustabouts. There is also a maintenance team of mechanics, engineers, electricians and a storeman who report to the Maintenance Supervisor (MS). The MS reports to the STP. In the Relevant Period all the Odfjell Group Offshore staff were employed by the Offshore Employers.

The onshore hierarchy is amply demonstrated by JS’s career. At the top of the reporting line is the VP Ops. The OM is one of the VP Operations’ direct reports. Also reporting to the VP Ops are those with direct responsibility for Quality, Health, Safety and Environment and Human Resources. As indicated JS’s role as OM included responsibility for all the UKCS operations. Beneath the OM will be a series of RMs (responsible for one or more Platforms) and reporting to the RMs may be Assistant Rig Managers (ARM) (each responsible for a single Platform) and Maintenance Team Leaders (MTL). Onshore staff were employed in the Relevant Period by the Appellant.

JS’s role as a witness was particularly, to assist us with an understanding of the role of the RM and generally the responsibilities of the onshore team in the context of service provision by the Appellant to the Operators. JS variously described the service provided by the Appellant in the context of fixed platform drilling as “a supplier of people, people and equipment” and, “the drilling crew and certain ancillary equipment/supplies to support drilling plus the obligation to inspect, maintain and replace that equipment”. The Appellant’s expertise being founded in the processes and procedures which governed its operations ensuring safe and effective drilling to be carried out.

In JS’s view it was these policies and procedures that distinguished one service provider from another. The rig crew, and specific knowledge of the rig’s operations, would usually transfer when the Operator changed contractor, Operator policies and procedures would also continue to apply to a new incumbent but the new contractor’s policies and procedures (certainly those which applied at corporate, local and business level), and overall contract operations would be the new ingredient into operations. JS was keen to emphasise that the asset level policies would be the purview of the STP who had direct knowledge and understanding of the rig but he accepted that these asset specific procedures also formed part of a cohesive whole with the higher level policies: i.e. a corporate policy concerning safe systems of work would be implemented through more detailed or specific policies at local, unit and finally asset level.

JS explained that the RM is primarily a contract manager concerned with the Appellant’s performance under the drilling contract with the Operator. The RM is also responsible for ensuring that the agreed budget for such services is met, and otherwise responsible for what the rig delivers contractually in accordance with the job description the terms of which are set out in paragraph 121 above. This would include oversight of all operations to manage contractual accountability to the client.

The role involves acting as the interface between the drilling operations performed offshore and the onshore client team through receipt of data and a series of daily meetings. These meetings would include meetings attended by the RM/ARM with: only the STP and/or D/NTP, client offshore representatives and STP, client onshore representatives and some meetings were all parties on and offshore. These meetings would represent a two-way flow of information ensuring that both the Appellant and the Operator client were fully appraised of operations at the drill site, maintenance, and overall safety of delivery. They also provided the opportunity to ensure that those offshore were aware of matters relevant to the operations including issues arising on other installations, shipment delays, weather updates etc. The client’s offshore team, through the WSL, would communicate the drilling work plans at such meetings (though as set out below this would be information and not direction for action which required written work instructions (WWI)). The meetings may also involve other associated specialist service providers i.e. geologists, mud engineers etc.

JS also explained that the RM’s role could aptly be described as “expectation management”:

“I'd say the rig manager is a − you're dealing with expectations. You're dealing with expectations of the client. You're dealing with expectations of your 86 guys offshore, the expectations of the maintenance team, expectations of the in the logistics, the expectations from the client 's drilling engineers. So you've got you are managing expectations from everyone and you are in the middle, you are that base, and you’re the guy that has to be the buffer, explain different things to the client.”

The RM was particularly concerned with lost time incidents and non-productive time (NPT) as under the contract, responsibility for any time not spent drilling needed to be determined as the cost of such time was usually borne by the party responsible for it. The RM was keen to ensure that only such time as was properly attributable to the Appellant carried the associated cost implications.

The RM was also the appraisal manager for the STP. The appraisal would be done in accordance with policies and procedures set by or within the Group as they applied to all Offshore Employees. The information used by the RM in the appraisal would be collected from a range of sources including individuals employed by the offshore Operator. The RM was also more generally engaged with the STP offering support and guidance where requested to facilitate and enable optimum performance by the STP in his role overseeing the offshore operations and leading and managing the offshore team. Direct operational decisions were the responsibility of the STP but an RM, particularly one with offshore experience, could offer challenge and encouragement with complex decision making on drilling matters.

JS described the role of the RM as discrete and distinct from that of the STP in terms of the individual responsibilities of each role with the STP being responsible for the offshore aspects of the drilling operation. Given the remote location of UKCS Platforms and, often, the immediacy of decisions that needed to be taken the STP would need to take operational decisions without prior consultation. The role of STP was to take such decisions on the information available to them on the Platform (including technical data from the drill site), observations and contributions from the Crew and the offshore client representatives to ensure safe (first and foremost) and effective/efficient drilling operations were carried out as required by the Operator’s drilling programme as communicated each day via daily drilling instructions. To that extent at least, the STP was autonomous from the RM; however, JS readily accepted that the STP would usually, where time and circumstances permit, also take soundings from the RM and that such soundings would be factored in, but not necessarily followed, by the STP.

The Operator devises the overall drilling programme by reference to well analysis undertaken by the Operator’s own (or appointed) engineers, surveyors, seismologists and geologists. The RM is responsible from a contract perspective for agreeing the programme i.e. that the programme can be delivered under the terms of the contract specification and within the agreed budget. A copy of the programme is provided to the STP.

Planning to deliver the drilling programme will be a collaborative exercise undertaken involving the Operator, the RM, onshore support functions and the STP. The role of the RM will be to review the plan and seek to head off obvious issues and resolve them with the Operator client before the operational aspects begin, thereby avoiding potential adverse impact on the STP or rig operations.

The overall drilling programme is executed through WWI (a series of more detailed instructions prepared for discrete steps in the drilling process) prepared by the Operator’s WSL who will obtain input and perspective from the offshore teams of the specialist service providers including the STP. Once prepared, but before finalisation, the WWI will be reviewed by the Operator’s onshore WTL (together with onshore engineers etc), with input from the Appellant’s onshore team, particularly the RM. Any points of contention raised by either the STP or the RM concerning the effective delivery of the drilling programme through the WWI will usually be managed onshore between the RM and the WTL as both the Appellant and Operator will seek to ensure cordial relations offshore.

From WWI daily drilling instructions (DDI) are produced by the WSL so as to prescribe the granular detail for each day’s drilling activity. The STP, in collaboration with D/NTP and the drillers will review the DDI and agree from a practical perspective whether it is agreed that DDI are safe and feasible to deliver on that day. Once agreed the DDI directs the drilling activity for that day.

Safety on a Platform is managed through PTWs. Each procedure undertaken on the Platform requires a PTW which needs to be approved by the OIM. The PTW records the assessment of risk prevention measures which need to be in place when performing particular tasks or procedures; they must address a broad perspective of risk including the interface with other tasks which may be taking place, and which may be impacted by the procedure and/or which may impact the way in which the procedure/task is carried out. The STP is responsible for preparing and submitting PTWs in respect of drilling tasks. However, the PTW will often incorporate a standard Odfjell Drilling (level 2/3 procedure). JS gave the example of “nippling up and down the stack” in which there was a 44 page Odfjell Drilling procedure that would be referenced rather than replicated into the PTW. He went to explain that some PTWs will be routine, but all may need to be amended, sometimes at short notice, to adapt to evolving conditions at the well site/more generally on the rig.

When operational problems arise both the STP and the RM will be involved and each may identify issues which will need to be communicated to one another, and to the Operator and ultimately resolved.

A key part of the RM role was also liaison with HR and Quality, Health, Safety and Environment (QHSE) and the logistics teams, particularly in the case of QHSE in the development of policies and planning training for the Crews on the Platforms over which the RM had oversight.

Interface with HR arose in a tripartite way with the STP:

As indicated NM was never employed by either the Appellant nor any of the Offshore Employers though he was a director of Dubai from April 2013 through to the end of the Relevant Period and beyond. His role for his employer was wider than his duties to Dubai with a focus on the development of the Odfjell Group’s business presence in the Middle East. This entailed facilitating investment and growth in business services including the move from the Sharjah to the Dubai Free Zone (necessitating the incorporation of Dubai) and the establishment of a human resources function in Dubai (though this HR department was not the HR department responsible for interaction with employees of Dubai working on the UKCS).

We found him to be an honest witness keen to help us understand operations in the Middle East and the role of the Dubai company in the Odfjell Group’s operations on UKCS. However, and for the reasons we identify as we recount and summarise his evidence, it is apparent that his role as director and in connection with the business of Dubai regarding the employment of those working on the UKCS was limited, simply because there was little required of him in that capacity.

As director there were the formal and routine aspects of his role: reviewing and approving annual accounts, signing off payroll, attending board meetings etc.

NM introduced the employment contracts to us and explained that Dubai was responsible, at least in a contractual sense, for usual employee-related matters i.e. ensuring they were paid, contributing to their pensions, holding appropriate insurances, etc.

Pursuant to the Services Agreement between Dubai and the Appellant, and as reflected in the language used in the 2013 annual accounts for Dubai, NM explained that the offshore crew/personnel element of the services provided by the Appellant to Operators was subcontracted to Dubai i.e. Dubai provided a sufficiently qualified crew/manpower capable of performing drilling services as required by the Appellant in order to fulfil the Appellant’s obligations to its Operator clients also providing daily reports in respect of project progress, manpower, installation maintenance and operation incidents and so on. NM described Dubai as “a body shop supplying people”.

NM explained that when Operator contracts were won or lost by service providers some but not necessarily all members of the drilling crew were likely to move with the contract (in a TUPE like way). In a situation in which the service provider continued to have operations in an area it was likely that they would look to retain the best staff, particularly those with knowledge of the procedures and policies operated by that service provider. However, that also needed to be balanced with the requests and requirements of the Operator. In many instances the Operator would look to ensure that certain members of the crew (usually the more senior ones) were transferred with the contract to retain continuity and familiarity with the Operator’s procedures and the Platform itself.

NM accepted that Dubai would not get involved in operational matters and that its only responsibility was to ensure that employees capable of understanding and executing the Operator’s drilling programme in accordance with both the Operator and Appellant’s drilling procedures were provided to fulfil the Appellant’s obligations to the Operator. However, this function was performed by the Appellant through the Consultancy Agreement. NM was also clear that Dubai had no involvement in setting drilling procedures.

He was equally clear that no one from Dubai would exercise supervision, direction or control over the individuals working on the platform but that, in his view, the person autonomously directing and supervising the Crew was the STP with the support but not direction of the onshore team although accountability for contract performance rested with the Appellant’s employees onshore. All liaison on drilling and personnel matters by the STP was with the Appellant’s onshore team and not with the Dubai directors.

NM explained the extent of the role fulfilled by Dubai in personnel management:

WC was an honest and helpful witness.

As indicated above he has worked on Platforms operated by BP for the majority of his working life. From October 2009 his employment was transferred under a TUPE-like arrangement to Sharjah and subsequently to Dubai. He was employed by Dubai up to the end of the Relevant Period. He was clear that who employed him was not a matter which concerned him. He was aware that his legal employment changed over time, some changes required him to change his “coveralls” i.e. the boiler suits he wore might change colour and the badges on them might change, but as far as he was concerned, he worked on BP platforms as part of the drilling team and not much changed – as the STP he was responsible for delivering a safe system of work and achieving the drilling outcome sought by BP and required of the Appellant.

WC provided us with a detailed explanation of the role of the STP and his interactions with the OIM and WSL (and other BP employed or contracted specialists), the Crew and the Appellant’s onshore team including the RM and HR function. He was clear that he had never interacted with the directors or senior leaders of Sharjah or Dubai or with any HR staff in those locations.

Whilst in some regards there is no such thing as a typical day, as there are so many contingencies and variables, there was a consistent pattern or structure to each day.

WC saw a clear demarcation between the role of the STP and the RM. In his experience the RM was responsible for managing the delivery of the Appellant’s contract with the Operator i.e. that the key performance indicators for safety, drilling and maintenance performance were monitored and met and where they were not that there was a clear explanation for not doing so. The RM’s role is supported through HR, QHSE and technically, from a drilling perspective, by a drilling engineer all based onshore. The RM is the direct onshore point of contact for the Operator.

As an STP, WC saw his role as being responsible offshore for the physical drilling activities, ensuring safe working and for the pastoral care of his Crew. However, as the activities were undertaken pursuant to a contract between the Appellant and the Operator the STP role also included the provision of relevant reports and information to the RM so that the RM could perform their function effectively. Daily interaction was generally limited to the provision of the information needed by the RM (through the meetings outlined above); however, WC acknowledged that he was an experienced STP and those more inexperienced may have had greater interaction with the RM. For WC the RM was the onshore conduit to support for offshore operations or where issues arose with the Operator (particularly concerning NPT) but that primarily he had autonomy to take the relevant day-to-day decisions at the well site and with the crew.

WC acknowledged that the RM was his appraisal manager but did not consider that the RM directed his daily activities. Appraisals were undertaken by the RM using information/feedback provided by the Crew, the WSL/OIM and the performance data for the drilling operations and not, in WC’s view, because he “reported to” the RM. Similarly, WC did not see himself as accountable to either RM or the onshore hierarchy above the RM; he considered that decisions made on the rig were his responsibility and he was accountable for them. As he explained: if he were negligent, he would expect that he would be dismissed and not the RM or the OM. We accept this as WC’s view of the position; he did not, and was not required, to think about the contractual position and, in any event, in his words, it was all Odfjell. We however need to consider the wider picture.

WC accepted that, to a greater or lesser extent, his leadership of the Crew and oversight of drilling operations was governed or influenced by procedures and policies set by the Appellant or Group. All applicable policies and procedures are available through Odfjell’s CMS and relate to all areas of activity. Personnel policies and procedures (which would prescribe matters such as recruitment, appraisals, discipline) were generally at corporate or local level (i.e. 1 or 2) as were many of the general requirements ensuring safety. Whilst, as WC understood it, there was not necessarily a cascade effect, some policies such as the level 1 safety policies would set the parameters for the more detailed policies at other levels. Odfjell safety policies would either align with or be subservient to those of the Operator. All employees on the Platform knew how to access the relevant safety procedures and policies whether they were the Operator’s or Odfjell’s.

WC briefly explained the procedure when unplanned events caused injury or where NPT occurred. Where the event was serious or needed intervention from onshore (i.e. if equipment from onshore or onshore specialist intervention would need to be quickly mobilised) it would be reported to the RM immediately (day or night); less serious incidents may only be reported during normal working hours. An offshore evidence gathering exercise would be undertaken in accordance with the relevant policies and procedures and reported up to QHSE who would then investigate both to seek to identify a cause (as this would then determine whether the Appellant was liable for any NPT caused) and determine where possible how to prevent it happening in future, feeding into amendment of procedure where necessary.

We were provided with a high-level overview of how drilling operations were managed. This reflected JS’s explanation, but we consider it appropriate to reflect the STP’s perspective:

The STP’s role in the management of the Crew was significant:

GF is an HR manager and has been employed by the Appellant since 2011. As with the other witnesses we found her to have been honest and we accept the substance of her evidence. However, and through no fault of hers, we found her evidence to be of limited assistance to the issue we have to determine. This is because, by reference to the Consultancy Agreements signed by the Appellant in favour of each of the Offshore Employers, there was no dispute that functionally it was the Appellant that undertook all HR functions on behalf of the Offshore Employers. Confirming the evidence of the other three witnesses the involvement of the Offshore Employers in personnel matters was limited to only the formal requirements for appointment and disciplinary or grievance procedures which, as per the “Know your Companies” presentation (and by reference to the Employment Act 2002) were required to be undertaken by the Offshore Employers together with payroll signoff.

Otherwise the Appellant, through the RM and/or HR and/or the logistic functions:

GF was asked to explain the language of the Consultancy Agreements and, in particular the change between the Sharjah and Dubai agreements from the provision of services ‘at the request and on the approval of’ to ‘under an authority to carry out the tasks’. GF considered the wording to be tidier but could not explain the change and was not aware of any formal authorisation or standing delegation of the tasks other than the agreement itself. However, as set out in her evidence and that of the other witnesses it was plain that the Appellant performed all the services specified as requested or empowered and as such there was no dispute who undertook these activities.

GF’s statement covered what she described as the “two aspects of rig management” which she explained as the offshore aspect: giving instructions to the Crew and supervising drilling; and the onshore aspect: supervising financial performance and compliance with the contract. In her view the STP was responsible for all aspects of offshore rig management and the RM for onshore rig management. In her evidence (including cross examination) she sought to explain the managerial interface between STP and RM. The STP’s appraisal by the RM was explained as necessitated because it “would not have been appropriate” for the directors of the Offshore Employer to do such appraisals because “they did not work directly with the STP” and lacked operational drilling experience. The RM was more appropriate because of the close working relationship on a day-to-day basis. She considered that the RM was not in a position of seniority to the STP they simply did different jobs. However, in cross examination she also accepted that there was a level of management above the STP and that the STP was accountable to the Appellant through the onshore management (RM and OM).

We were provided with very detailed notes on evidence by each party. We do not replicate those notes and only provide a high-level summary of them. However, we considered them in full.

We interpret the essence of the Appellant submissions on the facts as inviting us to focus on the Platform. From that perspective the STP was said to have run his Crew autonomously from but with the “support” of the Appellant’s onshore resources interacting with the Operator through the OIM and WSL. It was contended that the onshore activities were contract centric serving an entirely independent function to the offshore activities.

Offshore the drilling programme was broken down to WWIs and DDIs (into which the STP had, it was said, substantial input and would sign off) and these provided the blueprint for drilling activities undertaken. The WWI and DDI would incorporate or be carried out in accordance with procedures written and amended by the STP in the form of L4 TOPS which, it was claimed, were the intellectual property of the Offshore Employers by virtue of clause 15 of the Dubai template employment contract and previously under the confidentiality agreement.

As the area authority and again by reference to L4 TOPS the STP had control of all work done within the designated drilling area (including by other contactors) through the drafting of PTWs which were then approved by the OIM with no onshore intervention.

Particular emphasis was placed on the BP interface matrix to limit the role of the Appellant and Odfjell Group policy and procedure documents at L1 – 3. Such documents were said to be universally subservient to the equivalent BP policies with the only Odfjell procedures taking precedence being the drilling and well services operational guidelines (other than for well intervention) L4 TOPs.

Given the hierarchy within the Offshore Employees there was no direction given to the majority of the Crew by anyone other than the STP. The only contact Crew members would have with onshore personnel would have been regarding mobilisation and where an HR process was required (i.e. disciplinary or grievance). Even moderation of appraisal would have been unlikely to be visible to the Crew.

All offshore accountability ended with the STP who had complete authority to stop drilling or shut down particular equipment where there was a safety concern. In this regard the decision was absolute and could not be overridden even by the OIM save by a decision to remove the STP from the rig.

The Appellant resisted any conclusion that the STP was accountable to the RM in connection with the daily activities carried out pursuant to the DDIs. The RM was contended to be a bridge into onshore support (particularly logistics and regarding HR procedures) but essentially the role of the RM was entirely discrete: a contract and client relationship manager whose key accountability was for any NPT attributable to the drilling crew. It was for this reason that the RM had involvement and awareness of the drilling programme, was provided with DDRs (all of which were at least 6 hours out of date) and otherwise liaised with the STP; essentially as sources of information to ensure the effective contract delivery. Unlike the STP, the RM was not provided with real time drilling information; only such information allowed drilling decisions to be made with the immediacy required.

The support offered by or through the RM was said to be limited to the implementation of decisions taken by the STP i.e. ensuring the necessary resources were available to adhere to and deliver the DDIs. Any guidance provided by the RM to the STP was prescribed by the previous experience of the RM. Where the RM had been an STP they may be a valuable sounding board for decisions taken offshore but it would depend on the experience of the RM in that capacity.

The explanation of a day in the life of a rig as provided by WC amply demonstrated the autonomy experienced in delivery of drilling services by the STP and his crew, and the demarcation between the role of the STP and the RM.

It was contended that the contractual arrangements (starting with the LOGIC terms, Operator contracts, Service and Consultancy Agreements and the employment contracts) in substance supported a conclusion that the personal service of the Offshore Employees was not directed or controlled and thereby not made available or rendered to the Appellant. This was said to be so despite the requirements of clause 4.8 LOGIC conditions which stipulated that the Appellant was responsible for the programming of works.

As regards the direction and control of the Operator the Appellant again focused on the offshore activities. Reliance was placed on the degree of interaction offshore between the WSL/OIM and the STP and the critical role played by the drilling programme, WWI, DDI and PTWs.

HMRC contended that the extent of control which needed to be exercised on a day-to-day basis was limited and amply demonstrated on the facts.

It was accepted that the STP was a hugely important role in the management and direction of the other Crew members and that the STP represented the most senior employee within the Odfjell Group on the Offshore Installation. His role required him to operate with a high degree of autonomy authorised to take important operational and safety decision in the moment and without consultation. However, given the position was now clear following PGMOL, that was not, it was said, sufficient to conclude that it was the Offshore Employer who had or exercised day to day control of the personal service of the crew members.

In HMRC’s contention Offshore Employees operated under an organisational hierarchy whose apex was the Appellant and not the Offshore Employers. WC openly accepted that his interface was never with the leadership of whichever Offshore Employer he happened to be employed by but with the organisational infrastructure of the Appellant. The very raison d’etre for the services of the Offshore Employees was to meet the contractual obligations of the Appellant who therefore needed to control the day-today operations of those individuals through the RM and, as necessary, up through the OM and VP Operations.

Acting on the front line of accountability to the Operator for performance of operations the RM maintained a daily interface with the STP with oversight and ultimately management of all operations conducted through the STP by the drilling crew.

HMRC noted, in particular, that under the Singapore Services Agreement, Singapore was appointed to provide a drilling crew and other manpower. Whilst the language of the Sharjah and Dubai agreements appeared to change, it was contended, in substance, the service provided did not and that was supported by the oral evidence of both JS and NM. Each of the employment contracts provided for the employer to direct where and how the employee worked and that direction was exclusively provided by the Appellant and not the Offshore Employer and, as accepted by NM, the management of the Offshore Employers played no role whatsoever in operational matters concerning the performance of the Talisman and BP contracts.

Control was exercised through a network of policies and procedures with responsibility for ensuring compliance with such policies and procedures being exercised by the Appellant’s onshore management team. The Appellant prescribed various policies and procedures prescribing how a wide range of activities were to be carried out. Further policies and procedures were imposed through the Appellant’s contractual relationships with Operators. HMRC did not accept, as asserted by the Appellant, that the L4 TOPS “belonged to” the Offshore Employers and not did they accept the fact that they were written offshore, usually by the STP, meant that operations were controlled by the Offshore Employers as these procedures were reviewed (in particular from a health and safety perspective) and held by the Appellant. The obligation to follow all relevant policies and procedures was mandated on the Offshore Employer under the Services Agreements.

All material HR functions were exercised under the direction and control of the Appellant’s HR function. Every aspect of personnel management from recruitment to dismissal and everything in between was guided and controlled by the Appellant’s HR function acting, where relevant in accordance with the Group policies and procedures. The fact that it was done under the provisions of the Consultancy Agreements did not affect the conclusion that it was the Appellant that exercised the relevant control because the only involvement by the Offshore Employer in even the critical recruitment and dismissal decisions was essentially administrative.

On the evidence HMRC contend that the Operators do not direct or control the Offshore Employees. First and foremost, the evidence of all witnesses was that the RM was the interface with the Operator (certainly as evidenced by the detailed descriptions of the relationship with BP).

Having carefully considered all of the evidence we make the following findings of fact relevant to our decision and/or those which may be relevant to the Upper Tribunal should our decision on the law be incorrect:

The issue for us to determine is whether the facts viewed realistically demonstrate on the balance of probabilities that in pursuance of their employment by the Offshore Employers the personal service of the Offshore Employees was made available to the Appellant and rendered to it for the purposes of the Appellant’s business.

On the facts as we have found them, we consider that the Offshore Employees were legally contracted to provide personal service to the Offshore Employers. Pursuant to those contracts the Offshore Employees and in accordance with the Services Agreements (viewed realistically and in light of the parallel obligations under the Consultancy Agreements) were directed to work to deliver the Appellant’s obligations under the Operator Contracts. In doing so it was the Appellant that told each Offshore Employee through the rostering process when and where they would work.

In addition, however, we also consider that despite the apparent autonomy exercised by the STP the Appellant did direct how the personal service of the Offshore Employees was to be performed. This was through the detailed requirements of the DDIs contractually applied through the Appellant, and the various policies and procedures, including L4 TOPs which framed every task undertaken on the Platforms. There is no question in our mind that these factors constitute a sufficient framework for day-to-day control sufficient to conclude that the terms of the HEP are met.

On the facts we do not consider that there was any framework of control or actual direction provided by the Operator to the Offshore Employees. Any apparent direction by way of verbal interactions between the STP and the WSL/OIM needed to be confirmed in writing and such instruction was to the Appellant, who had directed the STP to follow such instructions as part of the contract.

We therefore dismiss the appeal for the reasons stated above.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.