Appeal No. EAT/595/94
		           EAT/596/94	

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 9th October 1995
	Judgment delivered on 21st December 1995

	Before

	THE HONOURABLE MR JUSTICE MUMMERY

	MRS M T PROSSER

	MR J A SCOULLER

MR R BAGOBAN	APPELLANTS
MISS B M PORTUGAL

(1) WEST BERKSHIRE PRIORITY CARE	RESPONDENTS
(NHS TRUST) SERVICES (2) SENSE

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the 1st Appellant	MR P ENGELMAN
(of Counsel)
Beatrice Lebow
139 Harringay Road
LONDON N15 3HP

For the 2nd Appellant	Rowberry Morris
	17 Castle Street
	Reading
	RG1 7SD

For the Respondents	MISS E SLADE QC
Clarks
Solicitors
Great Western House
Station Road
Reading
Berkshire RG1 1SX

MR JUSTICE MUMMERY (PRESIDENT)                These two appeals arise out of the restructuring of the National Health Service, the formation of an NHS Trust, the discharge of NHS patients and the assumption of responsibility for care in the community by a charitable organisation.  These changes created problems affecting the staff formerly employed by the Health Authority: whether their employment was to be transferred; whether they could be re-located; whether there should be voluntary redundancies; whether there should be compulsory redundancies; whether, in the case of compulsory redundancies, a fair selection has been made and a fair procedure followed.  These problems are complex.  In the proceedings before the Industrial Tribunal, preliminary points were taken with a view to determining them before a hearing on the merits.

The Facts
	The following facts were found by the Industrial Tribunal on the Preliminary Hearing of claims for unfair dismissal brought by two former employees in the Health Service, Mr Bagoban and Miss Portugal, against NHS Trust, West Berkshire Priority Care Services ("the NHS Trust"), and a charitable organisation, Sense.

	(1)  Borocourt Hospital at Wyfold in Berkshire was owned by the Oxford Regional Health Authority ("the Regional Authority") on behalf of the Secretary of State.  It was managed by the West Berkshire Health Authority ("the Authority") to provide care for patients with learning difficulties.

	(2)  From 26th April 1974 Miss Portugal was employed in the hospital as a care leader.  She became a State Enrolled Nurse on 16th May 1991.  She was dismissed by the NHS Trust on 30th May 1993.

	(3)  From 1st July 1979, until he was dismissed by the NHS Trust on 30th May 1993, Mr Bagoban was employed at the Hospital as a Charge Nurse.

	(4)  Both Mr Bagoban and Miss Portugal were employed by the Authority until 31st March 1993.  Both of their contracts contained mobility provisions.

	(5)  In May 1992, an NHS Trust was formed under the name of West Berkshire Priority Care Services.  It was one of three directly managed units.  It was to become operational on 1st April 1993.

	(6)  The staff employed at the Hospital originally numbered 553.  By March 1993 the total number of staff was reduced to 20.  Many of the staff had been re-located and the patients had been discharged.  By March 1993 the number of patients was reduced to 14.   They were all mentally handicapped and blind or deaf or both.  The intention was that the patients should be moved from the Hospital to two Homes in the community run by Sense, one at Wallingford, the other in Reading.  Sense is a registered national charity working with people who are dual sensory impaired and have other disabilities.  It was proposed that the move would take place before the proposed closure of the Hospital on 31st March 1993. 

	(7)  On 6th March 1993 fourteen patients suffering from deafness and blindness or similar disabilities were "discharged into the community".  In practice this meant that they were moved into 4 staff houses in the grounds of the Hospital and were then looked after by 20 seconded staff employed by the Authority, including Mr Bagoban and Miss Portugal, along with 21 Sense staff.  The seconded staff continued to be employed by the Authority until 31st March 1993.  Staff line management remained the same.  Sense managed and paid for the residents in the staff houses while the community homes were  being prepared.  Sense drew the DSS payments in respect of the patients after they had been discharged from the National Health Service.  The Authority made capital and revenue grants to Sense and provided medication to the residents in the staff houses as before.

	(8)  After the closure of the hospital on 31st March 1993 these arrangements continued, because Sense were still not ready to take the residents into care in their houses.  The staff houses at the hospital were not finally vacated until September 1993.

	(9)  As for Mr Bagoban and Miss Portugal, their secondment to work in the staff houses continued.  After 1st April 1993 they were employed by and paid by the NHS Trust.  The NHS Trust dismissed them at the end of May 1993.  Neither Miss Portugal nor Mr Bagoban ever became employees of Sense.  They were informed that they were dismissed for redundancy.  Neither of them had agreed to voluntary redundancy nor had they been found alternative work.

The Industrial Tribunal's Proceedings
	Some account of the course of the proceedings leading to the Industrial Tribunal decision is necessary in order to understand the arguments canvassed on this appeal.

	(1)  On 24th June 1993 Mr Bagoban made application to the Industrial Tribunal claiming the right not to be dismissed on the transfer of an undertaking to a new employer and the right not to be unfairly selected for redundancy.  He made his claim against both the NHS Trust and Sense.

	(2)  On 26th August 1993 Miss Portugal made an application to the Industrial Tribunal claiming unfair selection for redundancy, redundancy payment and unfair dismissal on the transfer of an undertaking.  She also made her claim against the NHS Trust and Sense.

	(3)  Both Respondents to the proceedings resisted both claims.

		(a)  The NHS Trust denied that the provision of care services at Borocourt Hospital was transferred to Sense in April 1993 or that there was a transfer of an undertaking by the NHS Trust to Sense.  The patients, who had been cared for, had been discharged and were no longer NHS patients.  The 4 staff houses were not part of the NHS Trust's care facilities and were not used as such.  They were adapted to provide temporary accommodation for the ex-NHS patients pending provision by Sense of alternative permanent accommodation.  No other assets or facilities were provided by the NHS Trust to Sense and the contracts of employment of staff were not transferred to them.  Miss Portugal and Mr Bagoban remained in the employment of the NHS Trust until their dismissal on 30th May 1993.  It was denied that they were employed in an undertaking in the nature of a commercial venture.  It was asserted that the dismissals were by reason of redundancy.  The NHS Trust had acted reasonably in treating redundancy as a sufficient reason for dismissing them.  It was denied that there was any unfair dismissal or unfair procedure.  Consultation took place.  Reasonable steps were taken to find them alternative work.  No other suitable work was available.  If there was a transfer of an undertaking, it was asserted that the dismissal was fair for an economic, technical or organisational reason entailing changes in the workforce within Regulation 8 of the Transfer of Undertakings Regulations 1981 ("the 1981 Regulations").  The dismissal was reasonable in all the circumstances.

		(b)  Sense denied that either of the Applicants had ever been an employee of theirs.  They asserted that they were not a commercial venture.  They were a separate organisation from the NHS Trust.  They did not provide institutional hospital care or medical services.  They provided training, education and rehabilitation services for people with sensory impairments and other disabilities.  It was denied that there was any transfer of an undertaking to them and that the 1981 Regulations applied.

	(4)  The issues in the proceedings were significantly multiplied when the NHS Trust made extensive amendments to their grants of resistance.  The main new point introduced into the dispute, which, in the event, proved to be determinative of it, was that the Applicants' employment with the Authority was not continuous with the employment by the NHS Trust.  It was asserted that there was no statutory continuity of employment and no transfer of an undertaking by the Authority to the NHS Trust.  Accordingly the Applicants had insufficient continuity of employment to entitle them to pursue their claims against the NHS Trust.  The following particular points were raised by the amendments:-
		(a)  The NHS Trust was established by an Order (The Establishment Order 1992) making the Trust operational from 1st April 1993.  The NHS Trust was to provide care services to the Health Authority pursuant to an NHS contract.  It was also to act, under an agency agreement, as agent for the Authority for the purpose of administering certain payments.

		(b)  At no time did the NHS Trust have the functions of managing Borocourt Hospital, nor did it have the function of providing residential care to former Borocourt residents at former staff homes on the Borocourt Estate which had not, in any event, been a function carried out by the Authority.  The NHS Trust was not granted any interest in the land and buildings, save for one building on the Hospital site.

		(c)  It was contended that there was no continuity of employment on the part of the Applicants by reason of the 1981 Regulations or the Acquired Rights Directive ("the Directive") or the Employment Protection (Consolidation) Act 1978 or the National Health Services and Community Care Act 1990 ("the 1990 Act").  The essence of the argument was that the NHS Trust were not given any responsibility for the Hospital; that the part of the Authority's undertaking in which the Applicants were employed was not transferred to the NHS Trust; that the Applicants were not employed by the Authority solely for the purposes of a hospital establishment or facility which then became the responsibility of the NHS Trust; that the provision of priority care services in West Berkshire did not constitute an undertaking or form part of an undertaking or hospital establishment or facility; nor did the provision of residential care to former Borocourt Hospital residents in the former staff houses constitute an establishment of facility; and that the Authority did not effect any transfer to the NHS Trust.

	(5)  The introduction of the issue of continuity of employment into the proceedings led the Applicants to make amendments to their application and to provide particulars which had been requested of their case against the NHS Trust.  In outline, the Applicants' amended case was that
		(a)  continuity of employment was preserved, if not by S.6 of the 1990 Act, by the fact of a relevant transfer of part of the Authority's undertaking on 1st April 1993 to the NHS Trust for the purposes of the Directive and/or the 1981 Regulations and the Applicants remained in that part of the undertaking transferred.

		(b)  The undertaking in question was identified as
			"The provision of priority care services in West Berkshire involving management, organisation etc."

		(c)  The Health Authority was the transferor.

		(d)  The transfer came about as the result of a transfer of management and other staff providing a distinct organisational structure and transfer of know-how, the use of premises and equipment and the transfer of responsibility to manage services relating to the undertaking.

	Particulars were also provided, without prejudice to the contention of a transfer to the NHS Trust, of an alleged transfer of an undertaking by the NHS Trust to Sense.  It is important to note that the new issue between the parties was as to whether there was a 2 stage transfer; stage 1 from the Authority to the NHS Trust, stage 2 from the NHS Trust to Sense.  It was not part of the Applicants' case that there was a transfer direct from the Authority to Sense.  At a late stage in the appeal, counsel for the Applicants, Mr Engelman, made an application for leave to amend the Originating Application to raise an allegation of the transfer by the Authority to Sense.  We refused to allow that amendment.  It was raised too late and involved a consideration of facts which had not been investigated or found by the Industrial Tribunal.

The Industrial Tribunal Decision
	Faced with a proliferation of issues in an apparently simple claim of unfair dismissal, the Industrial Tribunal identified four preliminary points for decision.  The hearing on those points took place at Reading over a period of 8 days from 28th February to 4th March 1994 and from 7th to 9th March 1994.  The evidence and argument resulted in the failure of the Application for extended reasons explained in a 73 paragraph, 31 page decision notified to the parties on 4th May 1994.

	The four preliminary points were determined as follows (see paragraphs 8 and 72 of the extended reasons).

	(1)  Was there statutory continuity of employment between the Applicants' employment by the Authority and the NHS Trust?  The Industrial Tribunal said no.

	(2)  If so, was there a transfer of an undertaking under the 1981 Regulations from the NHS Trust to Sense?  The Industrial Tribunal said that this was not applicable in view of the answer to (1).

	(3)  If not, whether, and to what effect, the Applicants can rely on the Directive?  The Tribunal held that the Applicants could not rely on the Directive.

	(4)  If there was a transfer of an undertaking, what was the date of the transfer?  The Industrial Tribunal said that this was not applicable.

	The Tribunal heard 7 witnesses and 8 days of evidence and argument and read many documents in order to reach a decision that there was no continuity of employment between the Authority and the NHS Trust.  Mr Bagoban appealed against that decision by a Notice of Appeal served on 14th June 1994.  Miss Portugal also appealed.  An application was made at the hearing for leave to amend her Notice of Appeal to raise the same points as raised by Mr Bagoban in his appeal.  Mr Engelman represented Mr Bagoban and Miss Portugal.  We allowed him to argue all points raised in Mr Bagoban's appeal on behalf of both of them, but deferred the decision whether to grant an amendment to the Notice of Appeal until we had heard all the argument and decided whether there was any point of law raised on the appeals.  If not, there was no point in allowing Miss Portugal to amend her Notice of Appeal.

	The essence of the point appealed against is that, on the true construction of the 1978 Act and the 1990 Act, there was no statutory continuity of employment and that there was no transfer of an undertaking for the purposes of the Directive, because the Priority Services Unit at the Hospital was not an undertaking and, if it was, the Applicants were employed in that part of the undertaking (ie, the Hospital) which was not transferred to the NHS Trust.  In any case there was no relevant transfer, only a temporary arrangement involving the provision of houses and secondment of employees to Sense to provide care for former NHS patients.  The NHS Trust never became responsible for the provision of care in the staff houses for those former patients.  On the appeal, argument by Mr Engelman, on behalf of the Applicants, and by Miss Elizabeth Slade QC, on behalf of the NHS Trust, concentrated on two points: (a)  the true construction and application of the provisions of S.6 of the 1990 Act to the facts found by the Tribunal; (b) and the applicability of the Directive to the NHS Trust.

	The questions were:
	(1)  Was there statutory continuity of employment between the Authority and the NHS Trust under S.6 of the 1990 Act? and 
	(2)  Was there a transfer of an undertaking for the purposes of the Directive from the Authority to the NHS Trust?

	The essence of Mr Engelman's argument was that the Industrial Tribunal had erred in law on both points, had wrongly concluded that the application failed on the preliminary points and that therefore the appeal should be allowed and the Applicants' claims heard on the merits by the Industrial Tribunal.

The Applicants' Submissions - General
	Mr Engelman prefaced his detailed arguments with general points on the contention of the NHS Trust that they did not become responsible for the care of former Borocourt Hospital patients and about the nature of an undertaking within the National Health Service.

	(1)  It is the duty of the Secretary of State to promote in England and Wales a comprehensive health service designed to secure improvements in, inter alia, the physical and mental health of the people of those countries: National Health Services Act 1977 ("the 1977 Act"), S.1(1).

	(2)  It is the Secretary of State's duty to provide hospital accommodation and medical and nursing services and facilities for the aftercare of persons who have suffered from illness: S.3(1)(c) and (e) of the 1977 Act.

	(3)  It is the duty of the Secretary of State to establish regional and district health authorities for the purpose of exercising powers conferred on him by sections 1 and 3 of the 1977 Act:  see sections 8(1), (1A) and (3).

	(4)  The Authority is a district health authority.  The Secretary of State may direct a regional health authority, who may in turn direct a district health authority as to the exercise of the Secretary of State's functions on his behalf: see sections 13, 14 and 17 of the 1977 Act.

	(5)  Borocourt Hospital constituted part of a facility which provided mental health services.  The patients there had learning difficulties and specified physical handicaps.

	(6)  Although the patients at the Hospital were formally discharged from NHS care, as a matter of fact and law they remained the responsibility of the Authority and, subsequently, of the NHS Trust.  In support of this proposition Mr Engelman relied on the facts found by the Industrial Tribunal, as summarised above.

	(7)  The responsibility of the NHS Trust for the continued care of the patients made it possible to identify part of an undertaking consisting of - 
		(a)  the Hospital premises owned by the Regional Authority and operated, on its behalf, by, first, the Authority, and then the NHS Trust;
		(b)  the staff employed to carry out the provision of mental health care services at those premises; and
		(c)  the organisational structure comprising the practice, procedure and line management in relation to the administration of the staff.
                               
The Applicants' Submissions on the 1990 Act
	Section 6 of the 1990 Act provides for the transfer of staff to the NHS Trust.  The material provisions in S.6(1)(a) are -
		"... This section applies to any person who, immediately before an NHS Trust's operational date -

			(a) is employed by a health authority to work solely at, or for the purposes of, a hospital or other establishment or facility which is to become the responsibility of the Trust ...".

	In paragraph 36 of the extended reasons the Industrial Tribunal held that this provision did not apply to the Applicants.  They held that prior to 1st April 1993 neither of the Applicants were employed to work solely at or for the purposes of Borocourt Hospital.  The contractual position was that they were employed by the Authority to work at Borocourt Hospital and wherever else they were required to work in the West Berkshire Health District.

	Mr Engelman challenged the correctness of this conclusion for the following reasons.

	(1)  The Borocourt Hospital formed part of a "facility" for the provision of mental health care services by the Authority.  

	(2)  That facility comprised all those hospitals, employees and organisational structures which delivered mental health care services to patients for the purpose of discharging the Secretary of State's functions via the Regional Authority and the Authority to persons entitled to receive their services.

	(3)  The Applicants were employed to work in that facility by the Authority.  The fact that the Applicants could be contractually required to work at premises other than Borocourt Hospital did not impact on their employment to work solely for the purposes of the facility.

	(4)  Part of that facility became the responsibility of the NHS Trust after 1st April 1993.

The Applicants' Submissions on Transfer of Undertaking Point
	Mr Engelman argued that the Industrial Tribunal also erred in law in holding that there was no transfer of an undertaking by the Authority to the NHS Trust.  He identified the undertaking as in the particulars of the Originating Application.  He submitted that the Industrial Tribunal should have identified that as the undertaking and then hold that a transfer occurred because, contrary to the Industrial Tribunal's conclusion, both the Authority and the NHS Trust were responsible for the provision of care to the former residents of the Hospital.

	Mr Engelman's more detailed points were as follows:-
	(1)  He relied on recent case law (Schmidt v. Spar kasse Bordesholm [1995] ICR 237; Dines v. Initial Healthcare Services [1995] ICR 11; Council of the Isles of Scilly v. Brintel Helicopters Ltd [1995] ICR 249 at 255C-257A and Kelman v. Care Contact Services Ltd [1995] ICR 260) as establishing that the decisive criterion for determining whether there is a relevant transfer of an undertaking is whether the undertaking in question retains its identity.  The retention of identity is indicated by the continuance by a new employer of the same or similar activities after the alleged transfer.  If, on a comparison of the relevant activities before and after the alleged transfer, there is a change of employer responsible for the activities of an undertaking which continued to be carried on and be identifiable, then that will usually mean that there has been a relevant transfer.

	(2)  On all the facts found by the Industrial Tribunal in this case, the only proper conclusion was that the staff employed by the Authority and subsequently by the NHS Trust were carrying on the same activities for both employers.  The identity of their employment had not changed, only the identity of their employer.

Conclusion
	In our judgment, the Industrial Tribunal did not err in law in rejecting the arguments for continuity of employment based on the 1990 Act and on the Directive.  We agree that, for the reasons advanced by Miss Slade QC on behalf of the NHS Trust, this appeal should be dismissed.  The result would be that the applications for unfair dismissal fail.

	In our view, on the facts found by the Industrial Tribunal this is a simple case in law.  The correct legal position is briefly as follows:-
	(1)  There is no dispute that, if S.6(1)(a) of the 1990 Act applies, the contracts of employment with the Authority by whom persons have been employed have effect from the operational date (1st April 1993) as originally made between the employees and the NHS Trust: S.6(3).  In such circumstances there is a statutory transfer and consequent continuity of employment.

	(2)  The functions of the NHS Trust are defined by the terms of the West Berkshire Priority Care Service National Health Service Trust (Establishment) Order 1992 (SI 1992 No.2581).  Article 3(1) provided that the NHS Trust was established for the purpose specified in S.5(1)(a) of the 1990 Act.  Article 3(2) was in these terms:
		"The Trust's functions (which include functions which the Secretary of State considers appropriate in relation to the provision of services by the Trust for one or more health authorities) shall be -

			(a)  to own and manage hospital accommodation and services provided at Fairmile Hospital, Wallingford, Oxfordshire, OX10 9AH and associated hospitals;

			(b)  to manage community health services provided from Prospect Park Hospital, Honeyend Lane, Reading, Berkshire, RG3 4EH and to own the associated premises".
	It was provided in Article 5(1) that the operational date of the NHS Trust should be 1st April 1993.

	(3)  Borocourt Hospital was closed by 31st March 1993 and did not fall within the functions of the NHS Trust defined in the 1992 Order.  The NHS Trust could not therefore become responsible for the care of patients of Borocourt Hospital or for any of the activities carried on there.

	(4)  The particulars of employment of each Applicant contained a mobility clause which provided that the place of work was Borocourt Hospital and added
		"If the need arises you may be called upon to work elsewhere in the West Berkshire Health District".

	(5)  The question posed by S.6(1)(a) of the 1990 Act has to be determined by reference to the relevant terms and purpose of the Applicants' contracts: Northern General NHS Trust v. Gale [1994] ICR 426 at 430A-431C.  It is clear from the terms of the mobility clause in the contract that it cannot be said that the Applicants were employed to work solely at Borocourt Hospital.

	(6)  As for Mr Engelman's argument that the Applicants were employed solely or for the purposes of a "facility", our view is that this has no support either in the terms of the 1990 Act or in the terms of the contract.  The NHS Trust was established by the 1992 Order pursuant to S.5 of the 1990 Act which provides -
		"(1)  Subject to subsection (2) or, as the case may be, subsection (3) below the Secretary of State may by Order establish bodies to be known as National Health Service Trusts (in this Act referred to as NHS Trusts) -

			(a)  to assume responsibility, in accordance with this Act, for the ownership and management of hospitals or other establishments or facilities which were previously managed or provided by Regional, District or Special Health Authorities; or

			(b)  to provide and manage hospitals or other establishments or facilities".

	The relevant facility for this NHS Trust was defined in the 1992 Establishment Order.  The Applicants were not employed solely at or for the purposes of that facility or other matters specified in that Order.  The NHS Trust only have responsibility for the facility referred to in that Order, not to the more extensive facility referred to by Mr Engelman.  The Applicants were not employed solely at or for the purposes of the defined facility.

	(7)  There was no relevant transfer of an undertaking by the Authority to the NHS Trust.  The Applicants were employed at the contractual place of work, Borocourt Hospital, subject to the mobility provision.  The Hospital was a unit within the Learning Disabilities Services under the direction of the Priority Care Services Unit.  The Applicants were employed in the part of the undertaking which was not transferred to the NHS Trust ie, Borocourt Hospital which was closed down by 31st March 1993.  The Industrial Tribunal found that the Authority had never been responsible for the provision of care to the 14 resident in the 4 staff houses.  On the contrary, they had been discharged from NHS care and were cared for by Sense with temporary help from the Authority and the NHS Trust.  The NHS Trust never assumed responsibility in law or fact for the care of the residents in the staff houses.

	(8)  This result is consistent with the most recent judgment of the European Court of Justice in Rygaard (see 48/94) delivered on 19th September 1995.  The reasoning in that case supports the proposition that the temporary help given by the NHS Trust to Sense with a view to completing the takeover by Sense of responsibility for the care of the ex-NHS patients does not constitute a transfer of an undertaking.  An undertaking is not regarded as being carried on in a "stable way" if the involvement of the alleged transferee is simply for the purposes of completing unfinished work.  This was a case where, because of a temporary hitch in Sense's assumption of responsibilities, there was an inter regnum during which the Authority and the NHS Trust provided staff support to Sense.  Although the NHS Trust became the employers of the Applicants in place of the Authority, that change of employer was not a transfer in the statutory circumstances defined in S.6 of the 1990 or within the terms of the Directive.

	For these reasons the appeals are dismissed.