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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Flairmark v. Allen & Ors [1999] UKEAT 484_99_2611 (26 November 1999) URL: http://www.bailii.org/uk/cases/UKEAT/1999/484_99_2611.html Cite as: [1999] UKEAT 484_99_2611

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APPEARANCES

 

For the Appellants	THE APPELLANTS NEITHER PRESENT NOR REPRESENTED
For the Respondents	MR T NEWTON (Consultant)


 


MR JUSTICE LINDSAY (PRESIDENT): We have before us the appeal of Flairmark Limited in the matter (1) Mr K Allen (2) Mr T J Halliday (3) Mrs V Halliday v Flairmark Limited. There was hearing on 12th February 1999 before an Employment Tribunal sitting at Newcastle-upon-Tyne under the Chairmanship of Mr J D Myers sitting with Mr R Keating and Mr R Smith. The decision, with extended reasons, was promulgated on 4th March 1999. The unanimous decision of the tribunal was that:

"… all applicants are qualified to bring unfair dismissal claims. …"

1. It is necessary to say something of the background. On 4th November 1998 the Employment Tribunal received three IT1's from, respectively, Mr Allen, Mr Halliday and Mrs Halliday. In each case, although the boxes on the forms are not entirely clear, it looks as if two respondents were described, firstly, Flairmark Limited and, secondly, "Meadridge". It is fair to say that the word "Meadridge"" is not accompanied by the word "Limited" and it could perhaps have been misread as if "Meadridge" was part of an address, but the accompanying particulars add to the word "Meadridge" the word "Limited" so that plainly "Meadridge" was a company namely "Meadridge Limited".
2. The claims were for unfair dismissal, wages and breach of contract plus, in Mrs Halliday's case, sex discrimination.
3. The IT3 response came only from Flairmark Limited. It might be that the Tribunal had misunderstood that Meadridge was not an intended respondent. Flairmark's IT3 says, rather strangely, the reason "by" the dismissal was redundancy; presumably it meant that was the reason "for" the dismissal. It also said:

"The Respondents purchased Meadridge Ltd on 19 May 1998 when the Applicant became an employee with duties of administrative assistant."

That was how Flairmark described their employee in Mrs Halliday's case. In Mr Halliday's case they used the same beginning but ended up in respect of him that "he became an employee with the duties of General Manager". In Mr Allen's case, again the beginning was the same but there they said "became an employee with the duties of Production Manager". So at that stage Flairmark itself was averring that each applicant was its employee or had been its employee. But in each case there was added that the applicant "has insufficient service with the Respondents to bring a claim for unfair dismissal." That raised, of course, a preliminary issue and a preliminary hearing was arranged at the Employment Tribunal to deal with the one question, namely:

"whether the applicants have sufficient continuity of employment as employees to bring a claim for unfair dismissal against the respondent".

The qualifying period relevant to dismissal in September 1998 was, at that time, two years.

4. It is, of course, a familiar part of the law in this area that if there is "a relevant transfer" of an undertaking from one person to another then contracts of employment of the employee are not terminated but are passed to the transferee as if originally made between the employee and that transferee - see TUPE Regulation 5(1). Thus the necessary continuity of employment to amount to a qualifying period can be acquired by working for two or more employers if there is a chain of "relevant transfers" between predecessor and successor as employer.
5. At the hearing before the Employment Tribunal on 12th February 1999 Flairmark, contrary to its IT3, began to argue quite differently, namely:

"2 … However, today, during the course of the hearing, the respondents alleged that in fact Flairmark Ltd is not the proper respondent, rather it should be Meadridge Limited. To that extent therefore they say that these applications against them are misconceived and any applications for amendment to add Meadridge Ltd in each case are out of time and if such applications be made they should be rejected."

6. Not surprisingly, that met with a counter-application by the erstwhile employees that:

"3 … Mr Newton made the application that we the Employment Tribunal, among other things, give leave to the applicants to add Meadridge Limited as second respondent and to reserve upon them all appropriate amendments to the applications."

7. The Employment Tribunal looked at the facts, which in chronological sequence are these. First of all, in paragraph 6 they say:

6 … all three of the applicants, Mr Allen and the husband and wife, Mr and Mrs Halliday, were employed by a company called Durham Counters Ltd. … There is no doubt that the applicants, all three, were employed by Durham Counters Limited."

There seems to have been no dispute but that those contracts with Durham Counters Limited began in 1995. That is the first stage in the chronology. The second is that there had been a CVA as to Durham Counters Limited which failed "in or about 17 April 1998." That appears from correspondence with the Insolvency Service. That is the second stage in the chronology. The third stage is, as found by the Employment Tribunal in their paragraph 7:

"Meadridge Limited took over, we find on balance of probabilities, the economic entity that was Durham Counters Limited. The only thing that changed was the presence of Meadridge Limited. If they had put a sign over the door to that effect, nobody would have known any real difference because the same work went on, the same 30 staff plus directors were continuing to work at producing the same products with the same machinery etc as before. The reality is that there was an independent economic activity transferred and it was transferred from Durham Counters Ltd to Meadridge Limited. We do not think we need to go into the various reported cases that have been cited to us, whether it's the case of Ny Molle KRO [1989] IRLR page 37 or Spijkers [1986] 2 Common Market Law Reports 296 or anything else for that matter. We are quite satisfied that the evidence is plain, what was transferred was an definite, definable, economic concern which continued at all times and did not change. It was transferred and we so find."

Although the tribunal did not, in terms, mention that there had been a relevant transfer for the purposes of TUPE, it is manifest that that was what they held had occurred. So that in ordinary course the employees of Durham Counters Limited would automatically have become employees of Meadridge. That is the third stage in the chronology. The fourth is that Flairmark bought all the shares in Meadridge Limited in April or May 1998. What the tribunal says is this:

"8 Shortly thereafter, meaning towards the end of April 1998 or beginning of May 1998, (it matters not precisely), there was then an acquisition of Meadridge Limited's issued share capital by Flairmark Limited. There is an agreement produced whereby the respondents on 19 May 1998 are acquiring [the] share capital of Meadridge Limited the employers of the three applicants. Share transfers are not covered and do not relate to the Transfer of Undertakings Regulations at all. What happened however after the share capital acquisition by Flairmark was that the three applicants continued to work in the same business of Meadridge Limited making the same goods, from the same place, with the same technical skills until eventually they were dismissed. …"

That fourth stage was the acquisition by Flairmark of the total issued share capital of Meadridge Limited. The next stage is that on 6th August 1998 Durham Counters Limited went into compulsory liquidation. That appears from correspondence with the Insolvency Service. On 22nd September 1998 one arrives at the date of the alleged dismissals. That is the sequence of fact as found by the Employment Tribunal and is discernible from the papers, which we have.

8. If the case was that the employer remained Meadridge, then there was plainly two years plus continuity from 1995 via TUPE into Meadridge down to 22nd September 1998. If the employer was truly Flairmark at the time of the dismissal, then time counting towards the necessary two years qualification period would, it seems, not have begun earlier than April 1998 as there is no relevant TUPE transfer occurring on a mere share purchase.
9. The position is very far from clear. The IT1's, it is to be remembered, had alleged that the workforce was transferred to Flairmark. The initial IT3 on behalf of Flairmark had said that Flairmark itself is the employer. But then, by 9th February 1999, Flairmark was asserting that the applicants had remained as employees of Meadridge. We have that at page 40 of our bundle. We have a letter of 9th February 1999 on the letter heading of Flairmark saying:

"We purchased the shares of Meadridge Ltd from Mr Ken Allen and Mr Terry Halliday on the 19th May 1998. Mr Allen and Mr Halliday resigned as directors at the time of the purchase. They were however re-employed as managers at Meadridge Ltd and were paid by that company. The arrangement did not work out and their employment was ended in September 1998."

10. Not suprisingly, given that on their own case Flairmark was 100 per cent owner of Meadridge, the Tribunal took the view that Flairmark should have worked out earlier what its case was going to be. In the Tribunal's paragraph 11 they say:

"… The respondents did not in plain and clear terms indicate on paper in the Appearance that they were not technically the employers of the applicants. It seems to this Tribunal that that is something they should certainly have done. They only aver that the applicants had insufficient service with them meaning Flairmark Ltd. …"

11. What was the Tribunal to do in the face of this change in the attitude of Flairmark? In the face of uncertainty as to the identity of the employer (even on the part of the person, Flairmark, who was either the employer or the owner of the total issued share capital of the employer) it could prove unfair, whilst ruling on a preliminary point, to proceed from a starting point, as if a common and agreed basis, that the employer had been Flairmark, and then to strike out Flairmark and to substitute Meadridge. If that were done, it could later transpire at the substantive hearing that Flairmark's first assertion, namely that it was the employer, had in fact been correct. It would be unfair to the applicants to require them proceed against only Meadridge given that they, the applicants, had asserted Flairmark to be the employer and that Flairmark also had asserted Flairmark to be employer, because it could transpire that, when fully examined, that there had indeed been a TUPE transfer to Flairmark; in other words, that something beyond a mere share transfer had taken place. After all, that was what the applicants themselves had been asserting because in their particulars of claim the applicants say:

"This business was then sold to FLAIRMARK LIMITED at the end of April 1998. There was a transfer of the whole of the workforce, use of the same equipment and transfer of goodwill."

12. In that circumstance, the directions which were given by the Employment Tribunal on 12th February 1999 seem to us entirely appropriate. What the tribunal said by way of directions was:

"(1) That Meadridge Ltd be added as second respondent and be served with the Originating Applications of each applicant.

(2) That the applicants do amend the Originating Applications to show their case(s) against both respondents. They shall present their amended Originating Applications in 14 days from 12 February 1999 and each respondent shall enter an appearance or amended appearance within a further 14 days thereof."

13. In consequence of those directions first of all the applicants amended their own applications. At page 29 of the our bundle they said:

"The Applicant contends that s(he) was employed by Flairmark Limited and that liability in these claims rests with that Respondent. In the alternative, liability lies with Meadridge Limited."

So the three individual applicants were now putting their case in the alternative.

14. The respondents' answer (page 33 of our bundle) has Flairmark as first respondent and Meadridge as second respondent and says this:

"2. The First Respondent claims it did not employ the applicants at the effective date of termination and has never employed them.

3. The Second Respondent is a wholly owned subsidiary of the First Respondent and was at all material times the employer of all three applicants.

4. The Second Respondent acquired the business of Durham Counters Limited, the original employers of the applicants, in August 1998.

5. The share capital of the Second Respondent was acquired by the First Respondent on 19th May 1998 by a transfer of shares and does not come within the scope of the Transfer of Undertakings (Protection of Employment) Regulations.

6. The First Respondent denies that it is liable to the applicants as alleged or at all, and that the application against it should be dismissed."

15. So far as concerns the adding of Meadridge, that cannot be complained of because it is Meadridge now which itself, by that amended Notice of Appearance, claims to have been the employer at all relevant times. So far as concerns continuing with Flairmark as a respondent, it is to be borne in mind there is a breach of contract, wages and sex discrimination claim as well as unfair dismissal. Breach of contract has no relevant qualifying period of the same kind, nor does wages nor does sex discrimination. They have different periods computed in different ways. Flairmark has earlier claimed to be the employer, as we have seen. The applicants still claim Flairmark to be the employer (albeit it is now a plea in the alternative) and it could be that it shall transpire, when all facts are plain, that Flairmark was, indeed, the employer.
16. The Tribunal was, in our view, entirely right to require Flairmark to continue to be a party. It may reasonably be said that if Flairmark was the employer and if its acquisition was only of shares then there may have been no relevant transfer and continuity of employment may have been broken.
17. The question thus arises: did the tribunal hold there to have been two or more years of continuity of employment already under the applicants' belt as against Flairmark? There is a somewhat delphic passage in their reasons. What they say in paragraph 10 is this:

"It seems to us quite plain, we think it really is unarguable, that the situation is and we do find that it is a fact that although the share capital was acquired the applicant's employment continued with Meadridge until Flairmark, though the fact that they had a 100% of the shares in Meadridge, exercised rights either of ownership, or acting as agents for the company dismissed the three applicants. We are quite satisfied that until they were dismissed there was continuous employment, a continuous thread, running from their starting year in Durham Counters through to Meadridge being acquired and continuing on after Meadridge was acquired."

18. The decision itself, which we have already quoted, namely:

"The unanimous decision of the Tribunal is that all applicants are qualified to bring unfair dismissal complaints."

is ambiguous because it does not say unfair dismissal claims against whom.

19. If the Tribunal concluded that, by way of a relevant transfer from Meadridge merely upon Flairmark's acquisition of Meadridge's share capital, Flairmark had become the employer and that, accordingly, two years plus continuity could be asserted by these applicants as against Flairmark by way of TUPE Regulation 5(1), we would have had to have held that there was, so far as we could tell, no evidence to support such a conclusion and that therefore there would have been error of law. But we are far from clear that that was what the Tribunal held. If it did, it erred in law. We would have had, pro tanto, to set it aside.
20. The Tribunal, as to the hearing, gave directions for the future, namely:

"(3) The hearing of all three applications is hopefully to be on 7, 8 and 9 April 1999 – which is a provisionally fixed date for hearing. All parties shall notify the Employment Tribunal within 7 days ie on or before 19 February that this date is (is not) convenient. If no notification is received the dates 7, 8 and 9 April will be treated as the definitive dates of hearing.

(4) There is to be mutual discovery of documents in 21 days from today."

Save for those dates, that decision, it seems to us, should stand.

21. As for the decision of the tribunal that the unanimous decision was that:

"all applicants are qualified to bring unfair dismissal claims…."

we do not set that aside so far as it relates to unfair dismissal claims as against Meadridge. But the substantive hearing should proceed from a starting point that whereas two years plus continuity has been demonstrated as against Meadridge, the question of whether Flairmark was at any material time the employer, and if it was, whether the applicants or any of them had two years plus continuity against Flairmark, are questions as yet unresolved but which are best left to be ruled upon at the substantive hearing when the facts need to be gone into.

22. We think that it is right that we give some directions as to the clarification by the parties of just what their respective cases are. Within 14 days after receiving the transcript of this judgment, the applicants, Mr Allen and Mr and Mrs Halliday, are further to amend their particulars of claim to set out whatever, if any, is their case or cases that Flairmark has been his or her employer and, insofar as unfair dismissal is claimed against Flairmark, upon what grounds, if any, they respectively claim two years or more qualifying service as against Flairmark. They are also to include particulars of any contractual wages claims against Flairmark. In Mrs Halliday's case, if she has a sex discrimination claim as against Flairmark, that, too, should be amplified in particulars.
23. The end result is that in this rather complicated procedural mish mash, the unanimous decision of the tribunal stands as long as it is understood that the qualification of the applicants to bring unfair dismissal claims has so far been established only as against Meadridge but that the question as against Flairmark is as yet unresolved but can be gone into at the full hearing.
24. We end by saying this that no one has attended on Flairmark's part this morning. Mr Newton has appeared to represent the applicants, Mr Allen and Mr and Mrs Halliday, but no one has appeared for Flairmark. A telephone message has been received that suggests that, first of all, they were not intending to appear and, secondly, it may be that the Flairmark company has already gone into receivership. Whether that is accurate or not, we, of course, cannot say and it may that before the matter goes further the applicants will need to consider whether that is true and what, in financial terms, the consequences of that are. That news does not affect our decision, which is, as we have indicated, that the directions that were given stand save as to the dates (which, of course, are now passed) and that the substantive decision stands so long as it is understood, as we have mentioned, that the ability or qualification to bring unfair dismissal claims so far has dealt only with the claims as against Meadridge, leaving the position as against Flairmark to be resolved in the way that we have indicated.