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You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Levenstein v College Christmas Cracker Co Ltd & Anor [1994] UKEAT 877_93_0212 (2 December 1994) URL: http://www.bailii.org/uk/cases/UKEAT/1994/877_93_0212.html Cite as: [1994] UKEAT 877_93_0212, [1994] UKEAT 877_93_212 |
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At the Tribunal
HIS HONOUR JUDGE H J BYRT QC
MRS M L BOYLE
MISS J W COLLERSON
(2) COLLEGE CRACKERS LTD
Transcript of Proceedings
JUDGMENT
Revised
APPEARANCES
For the Appellant MR A HAMMERTON
(of Counsel)
Shoosmith & Harrison
52-54 The Green
Banbury
Oxon OX16 9AB
For the Respondents (The 1st Respondents
neither being present nor
represented)
MR C WYNTER
(of Counsel for 2nd
Respondents)
Hammond Suddards
Moor House
119 London Walk
London EC2Y 5ET
JUDGE JOHN BYRT, QC: This is an Appeal from the Industrial Tribunal sitting in Cardiff. The decision in question was promulgated on 21 September 1993. The Tribunal found that the Appellant employee was dismissed by the First Respondents by reason of redundancy and that his dismissal was fair. They exonerated the Second Respondents on the basis that they found that the Appellant had never been employed by them and therefore there was no claim against them.
The background facts of this case, as found by the Tribunal, are as follows; the First Defendants were a company formed in 1981, essentially to market Christmas crackers and other items providing for entertainment at Christmas time. In the February of 1993, the leading lights of the company was the Applicant himself who was managing director, a Mr Worrell who was the Finance Director and an Mr Ellis-Smith who was the Sales Manager.
By the latter part of 1992, the company was in serious financial difficulties and owed large sums of money to their financial backers, Hambros Bank Limited. Because of those debts, Hambros Bank, who were debenture holders, appointed two administrative receivers on 17 February. On 25 February, a Shell company called Zenstate Limited, acquired the shareholding of the company with the support of Hambros Bank, and effected a management buy-out. On 5 March, Zenstate Limited changed it's name to College Crackers Limited, the name of the Second Respondents in this case.
The two Directors of the new company were Mr Worrell and Mr Ellis-Smith. On 30 March, Mr Hearn became Chairman, he being a nominee of Hambros Bank.
By the time the new company was formed, the Appellant had dropped out of the picture; Mr Worrell (so the Tribunal found) and presumably therefore Mr Ellis-Smith too had decided there was no place for the Appellant in the new company and had persuaded Hambros Bank to that effect too.
On 23 February, there was a meeting arranged (a hasty meeting one has to say) between the Appellant and Mr Worrell at a service station on the M1. At that meeting, the Appellant was told of the proposed buy-out by management and that there was no place for him with the new scheme of things and, according to his evidence, he was told that Hambros would not provide the finance for the new company if he was a part of this management team. Having been told all that, the Appellant was asked to resign. The Appellant said that he would, provided all his contractual rights were honoured by the company.
However, on the next day, 24 February, it would seem that two things happened; first, the Appellant telephoned the Receivers and although the Tribunal found that he was vague about the precise terms of the telephone conversation, it would seem that they indicated that he was no longer wanted in the Company. Second, he went back to his office in Coventry, cleared his desk, said farewell to the staff and left. As a result of his actions on that day, the Tribunal made a finding that, as from 24 February, the Appellant no longer regarded himself as being in the employment of the First Defendants. The Tribunal was in some difficulty as to the evidence. The First Respondents were not represented at the Hearing, nor did they present anybody to be called as a witness. The Second Respondents were represented by their Chairman, Mr Hearn, and he gave evidence as to documentation and various formalities concerning the new company. He had no first-hand knowledge of the events in February by reason of the fact that his appointment dated from 30 March only.
The main evidence in the case was that of the Appellant himself who was represented both by Counsel and solicitors. On the strength of his evidence and the documentation, the Tribunal posed three questions to be decided. The first was; had the Appellant resigned or was he dismissed, and they found that there was no evidence that he had resigned and indeed, the Appellant himself in evidence denied that he had. If he was dismissed the second question was when was he dismissed; was it before or after the transfer of the interest of the First Respondents to the Second Respondents? If the dismissal was before the transfer, was the dismissal as a result of the acquisition transfer so as to make it unfair within the meaning of Regulation 81 of the Transfer of Undertakings (Protection of Employment) Regulations 1981? The conclusions they came to were that the Appellant had been dismissed by the Receivers on 24 February 1993 for economic reasons within the meaning of Regulation 82 and that therefore he was entitled to redundancy pay. They were satisfied that his dismissal occurred before the business was transferred to the Second Respondents and that therefore there was no claim against the Second Respondents. Further, they found that there was no evidence to suggest the Appellant had been dismissed as a result of the transfer; his dismissal had taken place on 24 February and the transfer on 25 February. Accordingly, they decided his complaint that he had been unfairly dismissed, failed.
The Appellant had argued before us today that the finding of the Tribunal that there was no evidence he had been dismissed, as a result of the transfer, was perverse. He argued that that was a finding which no reasonable Tribunal, properly directing itself on the Law, could have concluded. Mr Hammerton who before us has argued the case on behalf of the Appellant with considerable care, claimed there was evidence linking the dismissal with the transfer. He concedes that there was little or no direct evidence about the reason for dismissal. The only direct evidence, he says, was contained in a letter dated 8 June 1993, written by the Administrative Receivers. This indicated that the Appellant had been dismissed for economic reasons, but, he says, precisely what the Administrative Receivers meant by that phrase is equivocal. Did they have in mind the wording of Regulation 82? The Administrative Receivers themselves gave no evidence with which to clarify that statement. He then went on to enumerate the circumstantial evidence linking the dismissal to the transfer set out in the grounds of Appeal.
Mr Hammerton reminded us that the burden of proving that the principal reason for the Appellant's dismissal was economic, rested with the employers. He contended that they had failed to discharge that burden. In support of that contention, he pointed out that neither Mr Worrell nor Mr Ellis-Smith, nor anyone else from the company had presented themselves before the Industrial Tribunal to give the reasons for the dismissal.
The basis of the Appellant's criticisms rests on a phrase which occurs in paragraph 9 of the Tribunal's Reasons. Having stated their conclusion that the Appellant was dismissed on 24 February 1993 for economic reasons, the Tribunal went on to state that there was no evidence to suggest that the Appellant had been dismissed because of the transfer. That latter phrase was unfortunate. Indeed it was somewhat surprising in view of the dismissal's close proximity, timewise, to the transfer of business to the new company. This was all the more surprising, one might think, in view of the fact that the Appellant, on the occasion of his appearance before the Industrial Tribunal, was represented by Mr Hammerton who addressed the Tribunal at length about the circumstantial evidence.
However, the EAT has to look at the Tribunal's decision as a whole and ask whether there was evidence to support the contention that the principal reason for dismissal was economic. If there was, the next questions is, whether that evidence was sufficient to enable a reasonable Tribunal to come to the conclusion it did, having properly directed itself on the Law.
When considering whether the reasons for dismissal were economic, it is appropriate to refer to these authorities in which the phrase "economic reasons" has been considered. In Wheeler v Patel and Another [1987] ICR pp 631, Scott J said:
"..Economic reasons must be reasons which relate to the conduct of the business.."
Mr Hammerton has assured us that whilst the full terms of that authority may not have been drawn to the Tribunal's attention, the terms of Scott J's pronouncement were. Second, Mr Hammerton referred us to the case of Gateway Hotels v Stewart [1988] IRLR, pp 157, as authority for the proposition that the burden of proving this point rests with the employers. We think it is perhaps a little unfortunate that, in stating their reasons, the Tribunal did not state expressly that they had addressed this question of the burden of proof, and furthermore, had failed to indicate that they had taken on board the restricted definition of "economic reasons", but at the end of the day, one has to consider what evidence there was before the Tribunal to support their decision that the Appellant was dismissed for economic reasons.
Mr Wynter who appeared for the Second Respondents, referred us to the evidence which supported the Tribunal's decision. There was first the evidence, which was unchallenged, of the dire financial circumstances of the original company (the First Respondents). This was acknowledged and referred to by the Tribunal in its reasons as part of the history but its significance to their finding was somewhat glossed over. Secondly, there was the evidence that on 17 February, the Debenture Holder had appointed Administrative Receivers. Next there was the letter which was originally not with our papers, but was adduced before the Industrial Tribunal when it heard this case, the letter of 22 February sent by the Administrative Receivers to the Appellant and also to Mr Worrell and, one would suspect, to a number of other employees of the First Respondents. In that letter, the Administrative Receivers drew attention to the financial position of the company and then temporarily laid off the Appellant and the other recipients of the letter whilst they made a market assessment of the financial situation of the company concerned.
On 8 June, there was the letter to which I have already referred in which the Administrative Receivers gave the reason for the Appellant's dismissal. It stated that:
"...that it was not economically viable to continue his employment..."
Of course against that has to be balanced the evidence which was referred to by Mr Hammerton in his argument, and the circumstantial evidence in this case.
We are of the view that there was sufficient evidence for a reasonable Tribunal, properly directing itself in the Law, to come to the conclusion that this Tribunal did. We take on board that the Tribunal hearing in this case was in a difficult position by reason of the absence of witnesses who might have been able to help it. As Mr Hammerton said, the quality of the evidence that was available to the Tribunal was not good.
It is irrelevant how the EAT would have determined this case, had it been sitting as a Tribunal of first instance. That is not a consideration for us. All we have to decide is whether a reasonable Tribunal could have come to the decision this Tribunal did on the evidence before it. On that basis, we find that this Appeal must fail.
Because the Tribunal found that Regulation 82 applied, it meant that Regulation 81 did not apply. Because 81 did not apply, nor did Regulation 51 and 53 apply and accordingly, there was no transfer of the Appellant's employment to the Second Respondents. Accordingly, the claim against them must fail too. In the circumstances, this Appeal is dismissed.