Appeal No. EAT/1026/97

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 1 December 1997

Before
THE HONOURABLE MR JUSTICE MORISON (P)
SIR GAVIN LAIRD CBE
MRS J M MATTHIAS

ECLIPSE UK LTD	APPELLANTS

MR A R P FOUNTAIN	RESPONDENTS

Transcript of Proceedings

JUDGMENT

PRELIMINARY HEARING

Revised

	APPEARANCES

For the Appellants	MR M WEST
(Senior Advocate)
Peninsula Business Services Ltd
361-365 Chapel Street
Manchester
M3  5JY	

	MR JUSTICE MORISON (PRESIDENT):   The purpose of this hearing is to determine whether there is an arguable point of law in an appeal which was raised on behalf of Eclipse UK Ltd against a decision of an Industrial Tribunal following a hearing on 7 July 1997, contained in a written decision, copies of which were sent to the parties on 16 July 1997.

	We would first of all like to pay tribute to the Industrial Tribunal Chairman in particular, for the careful way he has picked his way through relatively complicated facts and relatively complicated provisions of the law, in relation to the transfer of undertakings.  Secondly, we would like to pay tribute if we may to Mr West’s submissions to us this morning, on behalf of the prospective Appellant.

	We now turn to the background to this appeal.  Hastings Borough Council is a housing authority and was responsible for managing its housing stock.  In April 1994, in accordance with statutory requirements, it contracted out the maintenance services to a company who we will call “Eclipse”, who are the Appellants in this case.  Subsequently Hastings Borough Council transferred its housing stock to a housing association and they in turn adopted (as it is put in the decision) the contracts for services previously entered into between Hastings Borough Council and Eclipse, so that Eclipse became contractually obliged to render services to the housing association.  Those contracts related to two particular localities, Hastings and St Leonards.  In respect of each locality there were two separate contracts, one for maintenance and one for the management of void properties.

	Subsequently in 1997 there was a re-tendering process and, as a result, part of Eclipse’s contract passed across to the second Respondent to the application in this case Booker & Best (who are described as B & B in the Industrial Tribunal’s decision).  In particular it was the Hastings contracts which were transferred to them leaving Eclipse in charge of the St Leonard’s contracts.

	The question then arose as to the effect that the transfer of the contract from Eclipse to B & B had on the contracts of employment of those engaged by Eclipse on the Hastings contracts.  Essentially eight employees were identified as being concerned with working on the Hastings contract.  There was a certain amount of discussion between the parties, not surprisingly, as to the application or otherwise of the Transfer of Undertakings (Protection of Employment) Regulations and following a decision in Süzen in the European Court of Justice, it was the view of B & B that there was no transfer and therefore they were not prepared to take on the eight identified employees and in fact, in the event, only took two of them.

	Against that background the Industrial Tribunal then considered the question as to whether there was a transfer of an undertaking within the meaning of the Regulations in the light of the Süzen decision and other reports from the European Court of Justice.

	In an admirably clear judgment, the Industrial Tribunal found as fact that only two of the eight relevant workers were transferred; that there was no transfer of assets between Eclipse and B & B and no payment for goodwill.  They then recited the relevant passage from Süzen insofar as it dealt with Directives 77/187: it is set out in paragraph 21 of the Tribunal’s decision:
“‘does not apply to a change of contractor if there is no concommitant transfer from one undertaking to the other of significant tangible or intangible assets or taking over by the new employer of a major part of the workforce, in terms of their numbers and skills, assigned by the transferor to the performance of the contract.  The decisive criterion for establishing the existence of a transfer within the meaning of the Directive is whether the entity in question retains its identity.  The term ‘entity’ refers to an organised grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective.  The mere fact that the service provided by the old and new contractor is similar does not support the conclusion that an economic entity has been transferred.  An entity cannot be reduced to the activity entrusted to it ...
In order to determine whether the conditions for the transfer of an entity are met, it is necessary to consider all the facts characterising the transaction in question, including in particular the type of undertaking or business, whether or not its tangible assets, such as buildings and moveable property, are transferred, the value of its intangible assets at the time of transfer, whether or not the majority of its employees are taken over by the new employer, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer, and the period if any in which those activities were suspended ...
In labour-intensive sectors, a group of workers engaged in a joint activity on a permanent basis may constitute an economic entity, and such an entity is capable of maintaining its identity after it has been transferred where the new employer does not merely pursue the activity in question but also takes over a major part in terms o f their numbers and skills, of the employees specially assigned by his predecessor to that task’.”

	The Tribunal were of the view that there was no transfer of an undertaking; there was no transfer of assets; no transfer of goodwill; and no transfer of the majority of the employees.  In fact only two out of eight transferred as I have already indicated.  

	In his submission Mr West criticises the conclusion of the Industrial Tribunal in this way.  He says that if one reads Süzen carefully, it will be seen that the European Court was indicating that in relation to labour intensive businesses, the question is not merely whether the activity in question was being pursued before and after the transfer, but also whether the transferee takes over a major part, in terms of the numbers and skills of the employees specially assigned by his predecessor to that task.

	Mr West’s point is this.  He says that although only two out of eight were taken on, the Tribunal had not focused on the question as to their skills.  Whilst we understand the force of that submission, it seems to us that in the context of the whole of this decision, it cannot be said that the Tribunal’s approach to the question as to whether there has been a relevant transfer can be faulted.  There is no material here to suggest that the two as opposed to the other six employees possessed particular skills so that it could be said that when they transferred the heart of the business transferred, so that although they were in a minority, nonetheless the identity of the new business had been retained because the two critical employees had been transferred across.  We are not persuaded that it is arguable in this case that the Tribunal have erred in law.  It seems to us that this was essentially a question of fact and judgment for the Industrial Tribunal having first correctly identified the principles of law.  There is no dispute that they did correctly identify the principles of law.  We are not persuaded that this appeal is arguable as a matter of law, despite Mr West’s interesting and capable submission made to us for which we are grateful.  The appeal will be dismissed.