Appeal No. EAT/396/94

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 12 September 1994

	Before

	HIS HONOUR JUDGE J HICKS QC

	MS S R CORBY

	MR J C RAMSAY

MISS B CURWOOD	APPELLANT

CURVES (BOURNEMOUTH) LTD	RESPONDENTS

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellant	MISS J EADY
(OF COUNSEL)
Messrs Robin Thompson & Partners
Congress House
Gt Russell Street
London WC1B 3LW

For the Respondents	MR D MALIK
(OF COUNSEL)
Messrs Bonehill Jones
Solicitors
9 Mill Street
Sutton Coldfield
West Midlands
B72 1TQ

	JUDGE HICKS QC:  The Appellant, Miss Brandy Curwood, was employed as an aerobics instructor at the Health & Leisure Centre in Bournemouth from September 1990 until she was dismissed on 22 June 1993 in circumstances which the Industrial Tribunal found to constitute unfair dismissal.

	She brought her application originally against "Bentley's" (that is the word she inserted in the relevant part of the form) as that was the last name known to her as being used by her employers.  I put it in that way advisedly because there were many complicated changes in the constitution of the persons running this Centre.  All she knew at the time, I think it is accepted, was that, "Bentley's" was the last name by which they had traded.  In fact no-one is at all clear as to the true identity of her employers at the date of dismissal.  There was no response by the original Respondents and they played no part in the Application either before or at the hearing.

	The Applicant then learned that the Second Respondent, the Respondent to this Appeal, Curves (Bournemouth) Ltd, was carrying on the business of a similar club at the same premises, and it is not in dispute that they had been doing so since 3 September 1993, about 21/2 months after her dismissal.  She therefore joined the Second Respondent to the proceedings as such on the basis that there had been a transfer of undertaking to that Company for the purposes of the relevant statutory provisions and regulations.  

	The Industrial Tribunal rejected that submission, so that the finding of unfair dismissal went only against the absent and unidentifiable First Respondent and is no doubt worthless.  The Applicant does not appeal against the dismissal of her Application as regards the Second Respondent.  The Industrial Tribunal, however, also awarded costs in favour of the Second Respondent against the Applicant, and it is against that Order that she now appeals.

	The grounds of that award of costs by the Industrial Tribunal are to be found in paragraphs 10-13 of their Reasons.  They say that Mr Malik, in his application for costs, pointed out that not only had his instructing solicitors written on 22 November of last year to Mr Egan, pointing out the problems (Mr Egan being the trade union representative who was dealing with the matter on behalf of the Applicant) but that letter also made it clear that if the case proceeded it would be alleged that the proceedings were vexatious as against the Second Respondent.  They continue at paragraph 10:

		"Not having heard anything, on 13 December they wrote again, pointing out that they would be making a claim for costs and drawing the correspondence to the Tribunal's attention.  Again, nothing was heard, so, on 2 March a further letter was written pointing out that this matter was due for hearing today [that is the date of the actual hearing, 9 March 1994) and that unless they received confirmation by the end of the day, that the applicant was withdrawing against their clients, there would be an application for costs, which would involve substantial additional costs of attendance at the Tribunal.  A reply was sent by fax by the Trade Union Office the following day, indicating that Mr Egan would not be at the office that day, but would reply the next day. Friday, 4 March.  Nothing, in fact, was received.  On 7 March, the Trade Union Office faxed the Second Respondent's solicitors again, saying that the matter needed to be considered by the Trade Union's Legal Officers and that as soon as they were in a position to receive advice, they would inform the solicitor.  Apparently, undaunted, the Second Respondent's solicitor faxed again on 8 March [the day before the hearing] enclosing a whole series of documents and asking that they should be faxed or telephoned by return.  That was followed up by a telephone call at 11.00 am to Mr Egan's office, who confirmed that the documents had been sent to the Trade Union's Legal Department and that they would revert to the solicitor by 3.00pm, which the solicitors indicated was not very helpful.  Finally, the solicitors approached the Legal Department of MSF themselves, [the trade union] where they were told that they would be unable to have a decision at the earliest until 3.00pm, as not only must the lawyers look into it, but also must liaise with Mr Egan.

		11.  That, perhaps, is sufficient for our purposes.  This clearly is a catalogue of disaster.  Clearly, the Trade Union were put on notice in November that the matter was not as apparently they believed.  Despite the reminders, no action seems to have been taken of any sort to check the position.  It is the applicant's allegation, presumably on the advice of her Trade Union, that the Second Respondent should be joined.  Further enquiries from the Second Respondent's solicitors, or the Companies Registry at that time, would have established what the position was, instead of which the matter has been allowed to drift on in a way which we find totally unacceptable.

		12.  In our view, the applicant (bearing in mind that she, of course, is deemed to be acting through her duly authorised agent) has acted frivolously, certainly otherwise unreasonably and, as a result, costs have been incurred which never ought to have been incurred.

		13.  We consider this is a very proper case for costs.  We appreciate that nominally the Order is against the applicant, though we trust, in the circumstances, it will not be her who has to meet the bill.  Bearing in mind that the Trade Union were alerted by the letter of 22 November and allowing them sufficient time to make such enquiries as they felt justified, we would say that any costs incurred on or after 1 February 1994 must be paid by the applicant.  They should be taxed, unless they are agreed.

	Miss Eady for the Applicant first submits that the Tribunal erred in law in finding that the action or inaction of the Applicant and her Trade Union from 22 November until the following March was unreasonable conduct for the purposes of the rules as to the award of costs.  She puts that on the basis that it was not unreasonable to omit to take such steps as applying for discovery or particulars and she has referred us to Rajguru v Top Order Ltd [1978] ICR 565.  For reasons which will appear we are content to assume, without deciding, that that point fails and that the Industrial Tribunal did not err in law in dealing with that aspect of the matter in reaching the conclusion which they did.

	Miss Eady secondly submits that even had the Applicant acted promptly the Industrial Tribunal's decision as to costs can be upheld only if it would have been unreasonable for the Applicant to pursue the Application to a hearing in the face of the information which in the event emerged on 7 March, two days before the hearing, but which on the assumption that we are now following, could and should have been elicited earlier and at latest by 1 February.  In order to assess the validity of this submission it is necessary to refer to some aspects of the information and documents which were disclosed by the Second Respondents through their solicitors on 7 March.  They wrote a letter of that date which was sent by fax and therefore received by the Applicant's union on the same day and that letter begins:

		"I refer to our telephone conversation on Friday when I explained at length the situation regarding the proprietary interest in the Bournemouth club at which your member would appear to have been employed."

(I remark in passing that it does therefore appear that the substance of what is in the letter and the enclosures was probably first conveyed orally on 4 March; paragraph 10 of the Industrial Tribunal's Reasons rather suggests that they may have thought it followed, but that is of no significance for present purposes).  The letter goes on, in summary, to say that so far as Mr Landon is concerned, he ceased to be a manager or director of any company or organisation running that business from a date before the beginning of the Applicant's employment but because, as it is put, of his continuing friendship with Maxine Hughes, did on occasions attend at the Bournemouth premises to advise her in her running of the club and (we interpolate) it is a reasonable conclusion that to employees such as the Applicant his change of status may not have been apparent.

	What, however, it seems to us is most material for present purposes, is that after a number of vicissitudes Mr Landon found himself, as the letter records, the subject of a claim under his original covenant in respect of rent arrears built up by subsequent tenants who had taken assignments of the leases.  It is therefore clear from that passage, even if it had not been spelt out clearly before, that Mr Landon was an original lessee and of course despite assignment he would remain liable under the covenants.  What this letter tells the Applicant, and on present assumptions would have told her earlier if enquiries had been made, is that he found himself the subject of that claim.  A copy of an Affidavit by him is enclosed dated March 1993 sworn in the course of that litigation; the relevance of that date is that at the date of that affidavit plainly that litigation had not been settled.  But then the letter of 7 March goes on:

		"The new involvement of Mr Landon in Bournemouth is a direct consequence of that litigation.  It is a term of settlement between Mr Landon and the landlords of the premises that Mr Landon's company, Fitness & Leisure Group Limited should take over a new lease of the premises in Bournemouth.  Accordingly a wholly new company Curves (Bournemouth) Limited [the Second Respondent] was formed.  This was bought "off the shelf" in August 1993 and commenced trading from the site in Bournemouth under licence from the landlords in September 1993".

The Second Respondents' argument is then repeated that there cannot be no relevant transfer of undertaking because the Applicant's dismissal took place, it is said approximately 3 months (in fact it is rather less) before the new company commenced trading and it is asserted that there is no link between the two matters.

	The other matter which it is relevant to record before proceeding to deal with this submission is that paragraphs 7-9 of the Industrial Tribunal's reasons deal with the substantive application against the Second Respondents and the point under the Transfer of Undertakings Regulations.  They say:

		"We can accept that there might conceivably be argued to be a transfer of an undertaking from whoever was carrying on business in the premises in August to the Second Respondent on 3 September, in that there might be a goodwill of a business attaching to the premises, which therefore placed the Second Respondent in the position of carrying on the business.  Certainly it would appear the same type of business being carried on in the premises.  We are, however, far from convinced there was a transfer.  Much would depend upon what ultimately came into the hands of the Second Respondent.  We bear in mind that the assignment of the business in 1989 was not only of the goodwill, but of a number of physical assets which were listed in no less than 5 pages in the Schedule to the agreement.  However, the inescapable problem for Mr Egan is that even if that be so, his member was dismissed in June and was, therefore, not employed immediately before any transfer which occurred, at the earliest, on 3 September.  Any argument involving the transfer of undertakings is, therefore, doomed.

		8.  The common thread argument is equally flawed.  There was no common thread throughout.  There is no evidence before us that Mr Landon was involved from 1989 until 3 September 1993.  Indeed there is strong evidence to indicate that he was not, other than keeping an eye on things in the hope that the rent would be paid and he would not be called upon to honour his guarantee.

		9.  On that basis, the claim against the Second Respondent must fail.

By way of comment on that, it is plain that the Industrial Tribunal did not decide that there was no transfer of undertaking.  They say they are far from convinced that there was but they certainly on the face of that paragraph reach no decision on the point.  They place their decision rejecting the claim against the Second Respondent on the fact that the dismissal occurred in June and that the transfer, as they say, occurred at earliest on 3 September, that being the date on which the Second Respondents commenced trading.  What is meant by the common thread argument was a matter of some discussion during the argument before us.  Mr Malik was at the hearing before the Tribunal and with his help we are inclined to conclude that that was not, as it were, a separate argument in law distinct from the argument about transfer of undertakings, but was simply a way of putting the transfer of undertakings argument on the basis that in the absence of any express transfer inferences could be drawn from Mr Landon's continued involvement, and the Tribunal clearly rejected that insofar as it concerned continuous involvement from 1989 until 1993, but that as it appears to us does not resolve the issues raised by this point.

	On the assumption, as we have said, that the Industrial Tribunal was justified in finding that there was unreasonable conduct of the application by or on behalf of the Applicant in failing promptly to respond to the disclosures of 22 November, which were that the Second Respondent had not commenced trading until 3 September and had not been formed until August 1993, it seems to us that in law they should then have asked themselves whether any costs, and if so what costs - not necessarily in terms of amount, because that would be a matter for taxation, but in terms of what steps in the proceedings - what costs had been wasted or incurred as a result of that unreasonable conduct or failure to act, and for that purpose it is as we understand it accepted on both sides today, and seems to us to be an entirely reasonable assumption, that had prompt enquiries been made the Second Respondents would have responded in the same way as they eventually did in early March and would have made the same disclosures and that the Applicant and her advisers would therefore have been in possession of the same evidence - evidence, not facts, of course, because these were matters put forward by the Second Respondents and among other things the Applicant would have to consider what the apparent strength of that evidence was.

	The Industrial Tribunal in our view, had they addressed their minds to that question, certainly could not have dismissed the matter purely in terms of the interval of time between the dismissal of the Applicant and the commencement of trading by the Second Respondents; that is clear from the case of Litster  v  Forth Dry Dock [1990] A.C. 546, in which the House of Lords held that the relevant Transfer of Undertaking Regulations, having been enacted for the purpose of complying with a directive under European law, must be construed in a purposive way in a manner which would accord with the decisions of the European Court of Justice, and where necessary implying words which would achieve that effect, and that there therefore had to be implied into the relevant regulation after the words "immediately before the transfer", which relate to the employment of the applicant, the words "or would have been so employed if he had not been unfairly dismissed in the circumstances described by regulation 8(1)".

	It is apparent therefore that had the Applicant at the date at which the Industrial Tribunal held that enquiries should have been put forward known what was disclosed in the letter of 7 March and its enclosures the Applicant would certainly have been justified in going further than simply considering the relationship between the date of dismissal and the date of commencement of trading of the Second Respondents, and in particular would have been entitled to take into account that on the face of the Second Respondents' own documents and the case put forward in the letter of 7 March the commencement of business by the Second Respondents on 3 September had followed the settlement of a dispute in which Mr Landon was  subject to a claim for arrears of rent and which he had disposed of on the basis that he or a company controlled by him would take a lease of these premises.  It would seem to us  that at the very least the Applicant could reasonably have considered that on the face of the facts so far disclosed there might well be grounds for alleging that it was either a term of the settlement or at least in Mr Landon's mind in reaching that settlement that one of the factors, perhaps mitigating his liability in taking a new lease or perhaps going rather further and being a positive inducement to take a new lease, was that the business hitherto carried on under the name of Bentley's was likely to be in effect without an owner as far as goodwill was concerned at that date and that he or a company controlled by him would be able to pick up that business and take advantage of any goodwill which might attach to it.  It is not for us, and it would not have been for the Industrial Tribunal in considering the questions of costs, to decide whether that argument would succeed, in fact the Industrial Tribunal had already decided that the arguments on transfer of undertaking failed.  The issue, as it seems to us, to which they should have addressed their mind but did not, was what would have been within the range of reasonable conduct of the Applicant had that information been earlier obtained, and in particular would it have been reasonable to continue the application against the Second Respondents to a hearing.

	It is clear in our view that by failing to consider that matter the Industrial Tribunal did err in law.  At the very least it would have gone to the amount of costs which should have been ordered, or the period over which they should have been ordered, but in truth and reality it went to the question whether an order should be made at all, because the real issue which would have faced the Applicant in such a situation was whether to go to a hearing or not.

	The Industrial Tribunal did not address that question.  We enquired whether in those circumstances, having reached the conclusion which we have, we are bound to remit the matter to the Industrial Tribunal or are in a position to reach our own conclusion.  Mr Malik submits that we must remit, Miss Eady submits that all the relevant facts having been found by the Industrial Tribunal we are entitled to and in the circumstances should reach our own conclusion.  Mr Malik's submission is that the test is a stricter one, namely that we can substitute our view for the non-existent view of the Industrial Tribunal only if satisfied that no reasonable Tribunal could have reached a different conclusion from the one to which we arrive.  The latter is certainly the test, as we understand it, when the Tribunal has reached a conclusion on a particular point, albeit one arrived at under an error of law; the position here however is that no conclusion has been reached at all, and in the absence of authority having been cited to us we propose to accept Miss Eady's submission and reach our own conclusion.  That conclusion is that it would not have been unreasonable conduct by the Applicant to continue with the Application in the light of the information disclosed on 7 March had it been disclosed earlier.  Although in one sense hypothetical, that question of course did, albeit at much shorter notice, face the Applicant when enquiries were finally made at the beginning of March and the information obtained, and although the Application failed and although that conclusion is not appealed from, we do not consider that it could be found to be unreasonable conduct of the Applicant in the light of the letter of 7 March, at whatever date that information had been supplied, to continue with the Application.  Indeed, even on Mr Malik's stricter test, our view is that no reasonable Tribunal had it addressed its mind to that point could have come to any other conclusion.

	It follows that for that reason the appeal succeeds.  Miss Eady had two further points which she put forward and on which it would have been necessary to reach a decision had she failed on the points which we have already considered.  We do not need to deal with one of those points, which concerned the question whether the date chosen by the Industrial Tribunal was justifiable, but we do mention the other point because it seems to us a matter worthy of consideration and comment that this appeal should have been resisted and pursued to a full hearing in the circumstances which I am about to mention.  This point is that even if in principle an order for costs was appropriate the Industrial Tribunal should have dealt with the matter by considering the Applicant's means.  I have already recited the way in which in fact they dealt with it, which was in effect to say that they hoped that the Trade Union would meet the bill.  Miss Eady, however, referred us to the case of Carr v Allen- Bradley Electronics Limited [1980] ICR 603 in which this Tribunal held that in considering orders for costs the Tribunal should consider the means of the claimant himself rather than his Trade Union in deciding first of all whether or not to make an order in respect of costs and secondly the form of the order to be made.

	In that case the Employment Appeal Tribunal by agreement of the parties, the Industrial Tribunal having failed to consider that point, made its own assessment.  They said:

		"The only information that we have is that the Applicant [in that case] is an unemployed person without any significant means."

Miss Eady tells us that is also the position of the present Applicant, and the Employment Appeal Tribunal in that case made an Order for a payment of £50.

	Mr Malik concede that we should follow the case of Carr v Allen-Bradley Electronics Limited.  One of the parties was not prepared to consent to our making our own assessment, and since the extent of the Applicant's means was not investigated for this purpose by the Industrial Tribunal the result is that even had the Second Respondents succeeded on all other points this matter would have had to be remitted to an Industrial Tribunal in circumstances where all that is known about the Applicant is that at date of dismissal she was a young woman of 18 and that she was at the date of the hearing before the Industrial Tribunal still unemployed, and we are bound to ask ourselves whether had that been the final event of this Appeal - one which it is now conceded by the Second Respondents must have followed even had they been successful in all other respects - it is really right that time and money should be spent in this way.

	In the event for the reasons given earlier, the appeal is allowed and the order for costs against the Appellant discharged.

	[Miss Eady applied for the costs of the Appeal.  After hearing submissions on that application:]  Miss Eady on behalf of the successful Appellant now applies for an order for costs under Rule 34 of the Employment Appeal Tribunal Rules 1993.  The relevant words for present purposes are:

		"Where it appears to the Appeal Tribunal that ...there has been unreasonable.... unreasonable conduct in .... conducting the proceedings the Tribunal may order the party at fault to pay any other party the whole or such part as it thinks fit of the costs or expenses incurred by that other party in connection with the proceedings."

	The unreasonable conduct which Miss Eady submits is relevant here is the conduct of the Second Respondents in continuing to resist this appeal to and throughout the hearing today in the light of the fact that, as Mr Malik's Second Respondent concedes, the point clearly made in paragraph 6.13 of the Notice of Appeal that it was unreasonable of the Industrial Tribunal to make an order for the full costs without making enquiry as to the Applicant's means is a good point and must have succeeded in any event, so that at best the Respondents could have achieved a remittal of this matter to the Industrial Tribunal in circumstances where, as Miss Eady says - and it is all we know because there is no evidence, the matter has not been enquired into - the Appellant is a young unemployed woman.

	We have come to the conclusion that that was unreasonable conduct in conducting the proceedings, but we wish to make it clear briefly what was unreasonable about it.  The fact that Mr Malik made the concession during the hearing is not really of course the point, except that it suggests that it was from the outset unarguable, and we decide for ourselves without relying merely on his concession that it was unarguable.  The authority of Carr is plain and as we understand it has not ever been in doubt or dispute.  However, in considering what Order for costs if any would be proper in the circumstances we have to ask ourselves what would have been reasonable conduct and what would have been the result. 

	It seems to us plain that the Respondents should within a reasonable time of the Notice of Appeal which is dated 22 April 1994 have considered this among other points and that they would then, as we have said, inevitably have reached the conclusion that this aspect was unarguable.  Of course what would then have happened is to some extent a matter of speculation.  They clearly should not, in their client's own interests apart from anything else, thereafter have continued with a full-scale resistance to the appeal, and no doubt in the circumstances there would have been negotiations.  What the outcome of those negotiations would have been is to some extent a matter of speculation, but in the light of what is known about the Appellant's means it is difficult to avoid the conclusion that there would not have been this hearing today.  In view of the uncertainty as to how much costs would then perfectly properly have been incurred in resolving the matter we do not think it appropriate to make an order for the whole of the costs of the appeal and we think justice will be done if we make an order, as we do, for the Respondents to pay two-thirds of the Appellant's costs.