Appeal No. EAT/614/94

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 4th July 1996

	Before

	THE HONOURABLE MR JUSTICE MUMMERY (P)

	MRS R CHAPMAN

	MR J D DALY

FAIRFIELD CATERING CO LTD	APPELLANTS

1) MISS M A AYLING, 2) MS E AYLING	RESPONDENTS
3) SUMMIT CATERING (WEST) LTD

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR R PULLEN
(Employment Law
Consultant)

	The Ist and 2nd Respondents in person

	The 3rd Respondents neither present nor represented

	MR JUSTICE MUMMERY (PRESIDENT):   This is an appeal from the decision of the Industrial Tribunal held at Reading as long ago as 25th March 1994. The tribunal unanimously decided, in extended reasons notified to the parties on 24th May 1994, that claims by Miss Marina Ayling and Ms Eileen Ayling for redundancy payments and unfair dismissal against Summit Catering (West) Ltd should be dismissed and that claims by them for unfair dismissal against Fairfield Catering Co Ltd should also be dismissed. The tribunal went on to hold, however, that the applicants were dismissed by reason of redundancy and were entitled to redundancy payments from Fairfield Catering Co Ltd.

	As appears from the extended reasons, all of those orders followed from the principal ruling of the Industrial Tribunal that there had been no transfer of an undertaking by Fairfield Catering to Summit Catering within the meaning of the Transfer of Undertakings Regulations 1981 ["the 1981 Regulations"].

	There followed muddled history of procedural mishap. With the help of Mr Pullen, who has appeared on behalf of the appellants, Fairfield, we have been able to sort that out. The position in outline is this. Fairfield appealed against the decisions, that there had been no relevant transfer, and that they were liable for redundancy payments to the applicants. They served a Notice of Appeal on 24th June 1994. The respondents to the appeal were the two applicants, Miss Marina Ayling and Ms Eileen Ayling, and Summit Catering.

	Summit Catering served a respondents' answer on 5th August 1994, saying that they resisted Fairfield's appeal. They sought to uphold the decision of the Industrial Tribunal that there was no transfer of an undertaking. The respondents' answer was dated 4th August 1994 and signed by their solicitors, Trump and Partners. Summit had been represented by those solicitors at the hearing before the Industrial Tribunal. They soon fell out of the picture. The solicitors, through the partner dealing with it, Mr Bourns, who had represented them in the Industrial Tribunal, wrote a letter of 3rd October 1994 to this tribunal. They said that Summit had ceased to trade in circumstances where they had no continuing business, employees or assets. They went on to say this:

		"In those circumstances we are not instructed to make further representations on behalf of the company in these proceedings and doubt that it will be represented before the Employment Appeal Tribunal.

		We have written separately to the Appellants, Fairfield, who will no doubt consider their position in the light of the case of Allan and another -v- Stirling District Council, EAT 1994, IRLR 208."

	A further letter was received by this tribunal from Summits' solicitors. It is dated 4th March 1996. That was in response to an indication that the case would shortly be listed for hearing. In that letter they said:

		"We confirm that our client company, the second Respondent, does not wish to take any further part in these proceedings ..."

	Finally, there is a letter dated 26th June 1996 sent to Mr Pullen, the representative of Fairfield, saying that Trump and Partners were not instructed by Summit Catering. They would not be represented at the appeal today. The letter signed by Mr Bourns adds:

		"I am able to say that the company has not been subject to any proceedings under the Insolvency Act, but that it is most unlikely that there would be assets available to deal with any award in favour of the first and second Respondents should one be made."

(The first and second respondents are Miss Marina Ayling and Ms Eileen Ayling).

	The individual respondents have been the victims of misfortune in more ways than one. First, there has been a wrangle between Fairfield and Summit as to which of them is liable to make payments on their redundancy. Secondly, they have had mishaps in their representation. Ms Eileen Ayling has never been represented by solicitors. Miss Marina Ayling instructed a firm of solicitors in Slough, Owen White. They obtained Legal Aid. They wrote to this tribunal in January 1995 referring to a Legal Aid Certificate dated 25th November 1994 for Miss Marina Ayling to be represented on an appeal to the Employment Appeal Tribunal. On the same date, 11th January 1995, a Notice of Appeal was served by those solicitors on the Employment Appeal Tribunal. That names Miss Marina Ayling as the second appellant, when she was in fact already a respondent to Fairfield's appeal. Nothing more was heard from those solicitors. They said, in a covering letter with the Notice of Appeal, that Counsel had provided a favourable opinion and had settled the Notice of Appeal.

	Today Miss Marina Ayling and her mother have both attended after some problems with transport. We have been informed by them that the Legal Aid was not continued, because Miss Marina Ayling was not in a position to make the payments required under the Legal Aid Certificate. After she ceased to be legally represented, she and her mother consulted the Citizens Advice Bureau and Law Unit in Slough. We have been shown letters from them. It appears that they were handling the matter for them. But we are told by both Mr Pullen and Miss Ayling and her mother, that they were informed that they would not be represented by the Citizens Advice Bureau Law Officer on this appeal. He would represent them if the matter was sent back to the Reading Industrial Tribunal for a hearing, but would not be representing them on the appeal.

	In those circumstances, the only party in this case who is represented is Fairfield by Mr Pullen. We are grateful to him for the assistance which he has given to the tribunal in sorting out the procedural muddle and in finding the right answer to this appeal. On the procedural aspect we have made orders which enable both Miss Marina Ayling and her mother to take part in this appeal. The directions which we have given, are that the document called `Notice of Appeal' submitted by Owen White, as solicitors for Miss Marina Ayling, should be treated as a respondents' answer and cross-appeal. Ms Eileen Ayling, who has never been represented in the proceedings, has had her position regularised by an order that we extend the time until today for her to put in a respondents' answer. She is allowed to rely on her daughter's answer and cross-appeal, (which is in the form of a Notice of Appeal.)

	We decided that that was a more satisfactory course to adopt than simply adjourning this appeal in the hope that, at some later hearing, Miss Marina Ayling and her mother could be represented by skilled lawyers. We saw no realistic prospect of that happening. At the end of the day we have been able to deal with the substance of the appeal, using the helpful submissions by Mr Pullen and our own wits.

	We come to the substance of the appeal. The conclusion we have reached is that we should allow the appeal and substitute for the decision of the Industrial Tribunal a decision that Summit Catering (West) Ltd are liable to Miss Marina Ayling and Ms Eileen Ayling for redundancy payments and for unfair dismissal.

	We also order that, in relation to the calculation of compensation for unfair dismissal, the case is remitted to the Industrial Tribunal at Reading.

	As to the amount of redundancy payments and payments in lieu of notice, we have been able to arrive at figure with the help of Mr Pullen on the basis of the information which he has supplied. The calculations which we arrive at are these: that Miss Marina Ayling is entitled to a redundancy payment of £249.31 and to payment in lieu of notice of the same amount in addition. In the case of Ms Eileen Ayling, she is entitled to a redundancy payment of £779.78, and, in addition, she is entitled to payment in lieu of notice of £519.21. It will become apparent in a moment why we have mentioned actual figures.

	The position on the appeal is this. The tribunal found as a fact that both Miss Marina Ayling and her mother, had been employed by Fairfield from 1990 until the end of August 1993. From 1991 until 1993 Fairfield Catering had a contract to supply catering services in the form of school meals at a school called Long Close School, Slough. Miss Marina Ayling was employed as a general catering assistant, and her mother as a cook/manageress. The school paid Fairfield on a cost plus basis for its services and also a management fee. It appears that for most of the period, the services were provided by four employees, but by 1993, in order to reduce costs, the number was reduced to three - the two applicants and one other general assistant. 

	In the Spring 1993 the school decided to go out to tender for its catering needs. Fairfield, Summit and another company were invited to tender. Fairfield were unsuccessful. Summit were successful. From the start of the Autumn term in 1993, Summit were appointed to take over the catering. That left the employees of Fairfield in an uncertain state. They were informed by Fairfield that the 1981 Regulations had effect, that they automatically became employees of Summit and that they should present themselves for work on the first day of the term. This was not the view taken by Summit. In their view the 1981 Regulations did not apply and Summit were free to employ whoever they chose. Both Miss Marina Ayling and Ms Eileen Ayling presented themselves for work at the beginning of the term in September 1993. They were told by Summit that their employment was terminated and that Summit had no intention of employing them. They used their own employees. The tribunal found that the duties of those three employees used by Summit would be identical to those of the Fairfield employees. As neither applicant received any redundancy payment from either Fairfield or Summit, they applied to the Industrial Tribunal. In their originating applications, presented in September 1993, they claimed redundancy payments and money in lieu of notice.

	The tribunal found that there was no transfer of an undertaking and no liability on the part of Summit. The basis of their conclusion was that, on the interpretation of Regulation 5 of the 1981 Regulations by this tribunal in the case of Dines, there had been no transfer from Fairfield to Summit. No assets had been transferred by one to the other. Neither contractor had any interest in any real property, apart from the right to be present at the school to provide the services. No goodwill had been transferred. The staff worked exclusively within this unit. The work was not specialised and the accounts were dealt with at the relevant head office. Relying on this tribunal's decision in Dines, they said that there was no separate economic unit in order to constitute an undertaking. There was rather the presence of the respective companies as emanations of their undertakings or businesses at this particular location. Secondly, there was no transfer. The expression "transfer", "transferor" and "transferee" did not apply to a situation where nothing actually passed from one party to another, and where there was no nexus between the parties.

	Mr Pullen submitted, and we agree, that that reasoning was legally incorrect. The decision of this tribunal in Dines v Initial Health Care Services Ltd was reversed subsequent to the decision of the Industrial Tribunal at Reading. The decision of the Court of Appeal given on 19th May 1994 and reported in [1995] ICR 11 was, that where one company took over the provision of services from another company as a result of competitive tendering, the business or undertaking of the first company did not necessarily come to an end. The tribunal went on to hold that, on the basis of the agreed facts, that there was a transfer of an undertaking for the purposes of the Regulations, when the contract of the first contractor came to an end and a contract was granted to a second contractor to perform the same services at the same site.

	Mr Pullen relied in particular on a passage in the judgment of Neill LJ at page 23D-H. We agree with him that it is apparent from that judgment that, on the facts found by the Industrial Tribunal in this case, there was a transfer of an undertaking. Secondly, this tribunal is entitled, as the Court of Appeal was entitled in that case, to make its own decision on the question of a transfer without remitting the matter for a further hearing before the Industrial Tribunal. 

	We are in a good position to make a final decision on the case, because we note, from paragraph 12 of the extended reasons, that the solicitor Mr Bourns who represented Summit at the hearing, made this concession. He said that there had not been relevant transfer, but:

		"If there had been, then it was accepted on behalf of Summit that the Applicants had become their employees (having been employed by the transferor, Fairfield, immediately before the transfer), that they had been dismissed by Summit and furthermore that their dismissal would have been automatically unfair, pursuant to regulation 8 of 1981 Regulations."

In the light of that concession, we find that there was a transfer of an undertaking from Fairfield to Summit. We also find that Miss Marina Ayling and Ms Eileen Ayling were dismissed unfairly by Summit, because they were dismissed by reason of the transfer. Summit are therefore liable to pay them compensation for unfair dismissal. 

	We accept Mr Pullen's submission that Summit are also liable, by reason of Regulation 5(2)(a) of the 1981 Regulations, to meet the liability to both of the applicants for the redundancy payments. On the completion of a relevant transfer, all the transferor's liabilities under or in connection with the relevant contract of employment, are transferred by virtue of that regulation to the transferee. As held by the Court of Session in the case of Allan v Stirling District Council, the transferee is exclusively liable for the liabilities for unfair dismissal and redundancy payments, if there is a relevant transfer. There is no further liability on the transferor.

	For those reasons we allow the appeal. There was an error of law on the part of the tribunal in relying upon a decision of this tribunal which was later overruled. We decide that there was a relevant transfer. We decide that liability for redundancy payments, notice in lieu, unfair dismissal and all other matters relevant to their contracts of employment now rests with Summit.

	There is one further matter we should mention as neither Miss Marina Ayling or Ms Eileen Ayling have been represented. They should be made aware of their rights to make claims to the Secretary of State in relation to payments due to them from an insolvent employer. In particular, as to the redundancy payments, we draw attention to Section 106(1) of the Employment Protection (Consolidation) Act 1978 that provides:

		"(1)	Where an employee claims that his employer is liable to pay to him an employer's payment, and either-

			(a)	that the employer has taken all reasonable steps (other than legal proceedings) to recover the payment from the employer and that the employer has refused or failed to pay it, or has paid part of it and has refused or failed to pay the balance, or
			(b)	that the employer is insolvent and that whole or part of the payment remains unpaid,

		the employee may apply to the Secretary of State for a payment under this section."

Miss Marina Ayling and Ms Eileen Ayling would be well advised to take advice with a view to immediate action in making a claim against the Secretary of State for the redundancy payment. It is clear from the correspondence that Summit does not have the means to make the payments, even though it is not formally insolvent. 

	The applicants will also need to take advice about what rights they have to claim further payments under Section 122 of the 1978 Act. That may create greater difficulties for them, because liability to make payments on the part of the Secretary of State under that section, is dependent in part on them satisfying the Secretary of State that the employer has become insolvent. The definition of insolvency is not such as to catch a company in the position of Summit, which has ceased trading without formally going into compulsory or voluntary liquidation, administration or receivership. Nevertheless, advice should be taken on those matters, because it seems to us, on the information that we have, that if the applicants are to get any compensation at all, they should attempt to obtain it from the Secretary of State who meets certain payments that an insolvent employer is unable to meet.

	For all those reasons, we allow the appeal. We decide that there was a relevant transfer. We decide that Summit are liable for unfair dismissal, for the redundancy payments and for the payments in lieu of notice. It follows from that that Fairfield are not liable to make these payments. We also make the other orders in relation to the procedural matters that arose during the course of appeal.

	MR JUSTICE MUMMERY (PRESIDENT):   We have heard an application made by Mr Pullen that Summit should pay the costs of this appeal. We only have a limited power to order costs. We exercise our discretion not to award it in this case. As early as October 1994, Summit through their solicitors indicated that they were not making any representations on this appeal. They have not therefore caused anybody to incur costs on this appeal. They made it clear that they were not participating in it. It is not, in those circumstances, appropriate for us to conclude that Summit have behaved in a frivolous, vexatious or unreasonable way in relation to this appeal. As to the points they took in the Industrial Tribunal, that is relevant to the costs there, not here. We refuse the application.