Appeal No. UKEAT/0388/05/CK

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 11 November 2005

Before
HIS HONOUR JUDGE McMULLEN QC
MR D EVANS CBE
MS N SUTCLIFFE

PROJECT 90 LTD  	APPELLANT

(1) MISS L OSWALD
(2) MR ANDREW JEAL	RESPONDENTS

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR DESMOND WHITE
(Representative)
Project 90 Ltd
Foundation House
Lower Church Street
Stokenchurch
High Wycombe HP14 3TG
	
For the First Respondent

For the Second Respondent	MISS EMMA SMITH
(of Counsel)
Instructed by:
Messrs Thompsons 
Solicitors
Price House
37 Stoney Street
The Lace Market
Nottingham NG1 1NF

Second Respondent debarred from taking part in the appeal.	

SUMMARY

Transfer of Undertakings: Consultation & Other Information on Transfer 

Since the Employment Tribunal made apparently inconsistent findings, there would be a controlled remission with a direction to consider Cheesman & Others v Brewer Contracts Ltd [2001] IRLR 144 and make a finding on whether there was a relevant transfer.  The finding of unfair dismissal remains, with the liability therefor as between the employers depending on whether there was a transfer.

There appears to be no jurisdiction for the finding of a breach of Regulation 10 and 11 at the instance of this employee and this will be clarified on remission: see Mitie Group v Mullineaux [2005] UKEAT 0708/04/0402.

HIS HONOUR JUDGE McMULLEN QC

1.	This case is about the correct approach to what is said to be a relevant transfer under TUPE 1981.  The judgment represents the view of all three members.  We will refer to Miss Oswald as the Claimant, and Project 90 as the Respondent as at the Employment Tribunal. Mr Jeal the second Respondent is debarred.

Introduction
2.	It is an appeal by Project 90 against the judgment of an Employment Tribunal sitting at Leicester, Chairman Mr J Caborn, registered with reasons on 27 April 2005.  The Claimant was represented by an officer of the GMB.  Project 90 was represented by its managing director, Mr White, as today.  Mr Jeal was not represented but the Tribunal took account of the Notice of Appearance entered by him in conventional terms.  If there were a relevant transfer, then Project 90 is the transferor and Mr Jeal the transferee.

3.	Today the Claimant has the advantage to be represented by Ms Emma Smith of Counsel.  The Claimant contended that she had been unfairly dismissed by Project 90 or, alternatively, by Mr Jeal.  Both Respondents were therefore parties to the hearing although, as we have said, Mr Jeal played no part.  

4.	On appeal, Mr Jeal has been debarred for failing to respond to the EAT’s directions.  Project 90 initially denied that it had dismissed the Claimant.  Its position at the hearing was that if there were a dismissal, it was the responsibility of Jeal.

The issues
5.	The issues to be determined by the Tribunal were set out in paragraph 3 of its reasons:
“3.1		Was the claimant dismissed? If the claimant was dismissed by whom she was dismissed, was it either the first or the second respondent.
3.2		If the claimant was dismissed was the dismissal fair or unfair.
3.3		Do the Transfer of Undertakings (Protection of Employment) Regulations 1981 apply? If so how and what if any effect do they have in regard to the claimant's dismissal (if dismissed) and was there a failure to consult with an employee representative or a trade union representative about a proposed transfer.
3.4		Remedy (if appropriate)”.
The Tribunal upheld the Claimant’s claim against Project 90 and awarded compensation of £3,337.27 in respect of unfair dismissal and £520 because of the failure of Project 90 to consult pursuant to TUPE regulation 10.  

The appeal
6.	The appeal by Project 90 is upon the central contention that in the findings of the Tribunal, there are inconsistencies, but there is a clear finding that the business operated by Project 90 was transferred to Mr Jeal. Thus the contract of employment of the Claimant was transferred and with it any liability for unfair dismissal.  

7.	Directions sending this appeal to a full hearing were given in Chambers by HH Judge Peter Clark.  The directions included giving the parties opportunity to put material before us if the written record of the Tribunal appeared, on any particular matter, to be wanting.  No step has been taken pursuant to that.  

The law
8.	The Tribunal set out the law in paragraphs 4 to 7 of its reasons and, at least in respect of the provisions up to Regulation 10, there is no controversy.  As to Regulation 10, the Tribunal has not indicated, the jurisdiction under which an employee said to be an affected employee of an employer subject to a relevant transfer has a right to complain to an Employment Tribunal where there has been a failure.  We will return to this.

The facts
9.	We will state the facts tentatively because we have decided to allow the appeal and to send parts of it back.  The Tribunal made the following findings.  
“9.1		The first respondent is engaged in the business of operating tenancies at will, that is it takes on responsibility for running/managing licensed premises whilst the current owner of the licensed premises finds either a new owner/licensee and/or a new tenant for the premises. The first respondent employs in the order of 8 or 9 permanent employees.
9.2 		The first respondent assumed responsibility for the licensed premises known as Branagans Earl Shilton (Branagans) with effect from 21 April 2004. The first respondent appointed Ms Elaine Harvey, a self employed relief manageress of licensed premises to act as relief Manager at Branagans and which role she carried out during the period April 2004 to October 2004. She was responsible for the day to day running of the licensed premises including being responsible for staff.
9.3 		The first respondent was responsible for operating the licensed premises known as Branagans between 21 April 2004 and 11 October 2004 and it is not disputed by the first respondent that during this period the claimant was its employee, it being acknowledged by Mr White that "Personnel were transferred to Project 90 Limited from the previous owners as per TUPE regulations and passed on in the same way" see the written statement of Mr White.
9.4		The claimant was employed as Bar Supervisor at Branagans.  … The claimant's employment continued until it was terminated by the first respondent (Ms Elaine Harvey) on 8 October 2004 effective from 11 October 2004. The Tribunal finds that the effective date of termination of the claimant's employment was 11 October 2004. At the material time the claimant was a member of the GMB Trade Union.  …
9.5		The claimant was absent from work from August 2004 by reason of ill health. She presented medical certificates to the first respondent in relation to her ill health absence and during the period of her absence she received statutory sick pay. The claimant did not return to work prior to her employment being terminated. The claimant's sick pay with the first respondent was £76.32 per week. The claimant was medically fit and able to return to work two weeks after her employment terminated on the 11th October 2004. 
9.6 		It is the first respondent's contention that from about September 2004 discussions were taking place with the second respondent regarding the possibility of the second respondent taking over the licensed premises known as Branagans. The first respondent has not provided the Tribunal with any or any sufficient evidence as to when such discussions may have taken place; as to who was present at such discussions; as to where the alleged discussions took place; as to what if any documentation was considered and/or what was discussed. Further, although the first respondent's witness Mr White in his witness statements states "The outgoing Manager had explained what was happening to all of the employees", on the evidence before it, the Tribunal is not satisfied that this was the case. Indeed the evidence of Ms Harvey is unclear as to whether any discussions did take place with employees regarding the "transfer" of the business and what effect it may have upon their employment and if discussions did take place as to what was discussed. It is clear that no permanent employee of the first respondent met with the claimant and/or any other, employee employed at Branagans for the purpose of discussing the transfer of the business whether to the second respondent and/or to any other party.”

10.	It seems that there were other employees engaged by Branagans, some of whom were also on sick leave at the relevant time.  The Tribunal went on to say this:
“9.7		At the time the claimant commenced sick leave in August 2004 there were four other persons "employed" at Branagans and who were employees of the first respondent. In  addition to the claimant two of the other employees also began periods of sick leave at about this time ( i.e. late August 1 early September).
9.8 		After the claimant commenced her period of sick leave Ms Harvey appointed a person known. as Christina as Bar Supervisor and who became an employee of the first respondent (effectively carrying out the same duties for which the claimant was employed). This appointment was made in about late August 2004. Her employment transferred from the first respondent to the second respondent on the transfer of the business in October 2004 and continued until the 20th February 2005, at which date her employment with the second respondent ceased. It is understood that her employment was terminated because the second respondent is now operating a "family run" business.
9.9 		Whilst it is the first respondent's contention that proper meaningful consultation took place with its employees, in relation to the claimant, the Tribunal has unanimously concluded that this was not the case. No ,one categorised as a permanent employee of the first respondent attended at Branagans to discuss and consult with its employees regarding the possible disposal of the business to the second respondent. Further, although it is the first respondent's contention that consultation was undertaken by Ms Harvey, the Tribunal is satisfied that this was not the case. In the course of cross-examination Ms Harvey confirmed that she had not dealt with a "TUPE" transfer before and that she had had no training on how to deal with such transfers. She was unaware whether a Senior Manager of the first respondent had spoken to its employees and she did not inform employees that they were TUPE protected. It is clear that Ms Harvey did not consult with the claimant. 
9.10 	On the 8 October 2004, in company with a friend (Ms Coughlan) the claimant attended at her employer's premises, Branagans for the purpose of delivering her latest medical certificate and collecting sick pay.  The claimant met with Ms Harvey. It is the claimant's contention that in the course of her meeting with Ms Harvey she was told that the business was, transferring to a new licensee, that she was not wanted by the new licensee and that Christina (the person appointed by Ms Harvey) would be continuing as Bar Manager.  It is the claimant’s contention that she was dismissed by Ms Harvey on that day - effective 11 October 2004 and who told her that she would be sending the claimant her P45. Ms Harvey denies this was the case. There is a conflict of evidence. It is not disputed that there was a heated exchanged between the claimant and Ms Harvey and which was witnessed by Ms Coughlan as referred to in her witness statement and which evidence is accepted by the Tribunal. Having considered the evidence of the claimant, Ms Coughlan and Ms Harvey the Tribunal prefers and accepts the claimant's version of what happened on 8 October 2004 and in particular that she was told that she was dismissed and would be sent her P45. Subsequently the claimant received her P45 which referred to her employer as the first respondent and gave her leaving date as 11 October 2004 (see page 59 of the bundle). At no , time did the claimant meet with and or have any dealings with the second respondent. The claimant was not dismissed by the second respondent -she was dismissed by the first respondent”.

11.	The Tribunal resolved the conflicts of evidence in favour of the Claimant and then went on to decide the issue of consultation where it said as follows:
“9.11	There was no consultation with the claimant regarding the proposed transfer of the business known as Branagans from the first respondent to the second respondent and on the evidence before it the Tribunal is not persuaded that there was any consultation with any other employee of the first respondent regarding ~ possible transfer. Further it is clear that there was no consultation with the claimant's representative (GMB, Trade Union) and/or any other employee representative whether on behalf of the claimant and/or any other employee.  It is not disputed by the first respondent that the transfer regulations apply in this case – see Mr White’s witness statement and the comment"…..Passed on in the same way".

12.	Reading paragraph 9.8 alone, it would appear that there is a finding in favour of Project 90 that there was a transfer of a business.  The Tribunal has identified what the business was, which was the operation of licensed premises known as Branagans.  A similar view could be taken of the passage in the Tribunal’s conclusions at paragraph 19 where there is this:
“19. 	In the absence of the first respondent having established a "reason" for the termination of the claimant's employment, the Tribunal has considered what was the reason for termination and has concluded the first respondent terminated the claimant's employment because its operation of the business from the licensed premises know as Branagans was coming to an end. The business was to be continued by and was continued by the second respondent. The Tribunal has not been provided with any evidence as to the nature of the transaction between the first and second respondent if indeed there was a transaction”.
Thereafter the Tribunal decided that there was insufficient evidence as to the nature of the transaction.  On that basis, it held that responsibility for what it found to be an unfair dismissal lay with Project 90.  

The submissions 
13.	On appeal, there is no challenge to the findings about unfair dismissal, nor to the supplementary finding that there was a failure to consult the Claimant’s representative, the GMB. It is, however, submitted by Project 90 in a Skeleton Argument prepared for Mr White by his solicitors that there were sufficient findings to constitute a relevant transfer and for want of them, the responsibility for the dismissal of the Claimant and its unfairness passed to Mr Jeal.  

14.	On behalf of the Claimant, it is contended that the Tribunal lacked sufficient material for it to make findings.  It was the duty of Project 90 to put forward material sufficient to show that there was an entity which was transferred and with it, the contracts of employment – in this case, the Claimant’s; and that it failed to do so.  The real contest in the case was between the two Respondents.  The position of Project 90 was initially that there was no dismissal at all and that any responsibility for the Claimant would pass to Mr Jeal. Mr Jeal made no admissions. The Claimant when pressed at the hearing, we are told, plumped for the responsibility resting upon Project 90, although she had, in her claim, put it in the alternative as Mr Jeal.  

15.	Ms Smith, in her excellent Skeleton Argument, has very fairly accepted that there are inconsistencies, in the findings to which we have pointed above, but essentially, this matter is resolved by attention as to where the burden of proof lay.  Insufficient material was advanced by Project 90 to show the nature of the arrangements subsisting at the time.  #

The legal principles
16.	In our judgment, the legal principles to be applied in a case where there is an allegation of dismissal following a TUPE transfer or connected to it are set out in the judgment of the EAT, Lindsay P in Cheesman & Others v Brewer Contracts Ltd [2001] IRLR 144 at paragraph 10 and 11:
“10.		From those four cases we distil the following. We shall attempt, although it is not always a clear distinction, to divide considerations between those going to whether there is an undertaking and those, if there is an undertaking, going to whether it has been transferred. The paragraph numbers we give are references to the numbering in the IRLR reports of  the ECJ's judgments. Thus:
(i)	As to whether there is an undertaking, there needs to be found a stable economic entity whose activity is not limited to performing one specific works contract, an organised grouping of persons and of assets enabling (or facilitating) the exercise of an economic activity which pursues a specific objective -Sanchez Hidalgo [1999] IRLR 136 paragraph 25; Allen [2OOO] IRLR 119 paragraph 24 and Vidal  [1999]IRLR 132 paragraph 6 (which, confusingly, places the reference to 'an economic activity' a little differently). It has been held that the reference to 'one specific works contract' is to be restricted to a contract for building works -see Argyll Training [2000 ]IRLR 630, infra, EAT at paragraphs 14-19.
(ii) 	In order to be such an undertaking it must be sufficiently structured and autonomous but will not necessarily have significant assets, tangible or intangible -Vidal [1999] IRLR 132 paragraph 27; Sanchez Hidalgo [1999] IRLR 136 paragraph 26.
(iii) 	In certain sectors such as cleaning and surveillance the assets are often reduced to their most basic and the activity is essentially based on manpower - Sanchez Hidalgo [1999] IRLR 136 paragraph 26.
(iv) 	An organised grouping of wage-earners who are specifically and permanently assigned to a common task may in the absence of other factors of production, amount to an economic entity -Vidal  [1999] IRLR 132 paragraph 27;
(v) 	An activity of itself is not an entity; the identity of an entity emerges from other factors such as its workforce, management staff, the way in which its work is organised, its operating methods and, where appropriate, the operational resources available to it  Vidal [1999] IRLR 132 paragraph 30; Sanchez Hidalgo [1999] IRLR 136 paragraph 30; Allen [2000] IRLR 119 paragraph 27.
11 As for whether there has been a transfer:
(i) 	As to whether there is any relevant sense a transfer, the decisive criterion for establishing the existence of a transfer is whether the entity in question retains its identity, as indicated, inter alia, by the fact that its operation is actually continued or resumed -Vidal [1999] IRLR 132 paragraph 22 and the case there cited; Spijkers v Gebroeders Benedik Abattoir CV [1986] ECR 1119 ECJ; Schmidt v Spar-und Leihkasse [1994J IRLR 302 ECJ paragraph 17; Sanchez Hidalgo [1999J IRLR 136 paragraph 21; Allen [2000J IRLR 119 paragraph 23.
(ii) 	In a labour-intensive sector it is to be recognised that 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 of their numbers and skills, of the employees specially assigned by his predecessors to that task. That follows from the fact that in certain labour-intensive sectors a group of workers engaged in the joint activity on a permanent basis may constitute an economic entity -Sanchez Hidalgo [1999J IRLR 136 paragraph 32.
(iii) 	In considering whether the conditions for existence of a transfer are met it is necessary to consider all the factors characterising the transaction in question but each is a single factor and none is to be considered in isolation -Vidal ~999J IRLR 132 paragraph 29; Sanchez Hidalgo [1999J IRLR 136 paragraph 29; Allen [2000J IRLR 119 paragraph 26. However, whilst no authority so holds, it may, presumably, not be an error of law to consider 'the decisive criterion' in (i) above in isolation; that, surely, is an aspect of its being 'decisive', although, as one sees from the 'inter alia' in (i) above, 'the decisive criterion' is not itself said to depend on a single factor.
(iv) 	Amongst the matters thus falling for consideration are the type of undertaking, whether or not its tangible assets 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 company, 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 they are suspended -Sanchez Hidalgo [1999J IRLR 136 paragraph 29; Allen [2000] IRLR 119  paragraph 26. 

(v) 	In determining whether or not there has been a transfer, account has to be taken, inter alia, of the type of undertaking or business in issue, and the degree of importance to be attached to the several criteria will necessarily vary according to the activity carried on -Vidal [1999] IRLR 132 paragraph 31; Sanchez Hidalgo [1999] IRLR 136 paragraph 31; Allen [2000] IRLR 119 paragraph 28.
(vi) 	Where an economic entity is able to function without any significant tangible or intangible assets, the maintenance  of its identity following the transaction being examined cannot logically depend on the transfer of such assets – Vidal [1999]  IRLR 132 paragraph 31; Sanchez Hidalgo [1999] IRLR 136 paragraph 31; Allen [2000] IRLR 119 paragraph 28.
(vii) 	Even where assets are owned and are required to run the undertaking, the fact that they do not pass does not preclude a transfer -Allen [2000] IRLR 119 paragraph 30.
(viii) 	Where maintenance work is carried out by a cleaning firm and then next by the owner of the premises concerned, that mere fact does not justify the conclusion that there has been a transfer -Vidal [1999] IRLR 132 paragraph 35.
(ix) 	More broadly, the mere fact that the service provided by the old and new undertaking providing a contracted-out service or the old and new contract-holder are similar does not justify the conclusion that there has been a transfer of an economic entity between predecessor and successor -Sanchez Hidalgo [1999] IRLR 136 paragraph 30.
(x) 	The absence of any contractual link between transferor and transferee may be evidence that there has been no relevant transfer but it is certainly not conclusive as there is no need for any such direct contractual relationship: Sanchez Hidalgo [1999] IRLR 136 paragraphs 22 and 23.
(xi) 	When no employees are transferred, the reasons why that is the case can be relevant as to whether or not there was a transfer -ECM [1999] IRLR 559 p.561.
(xii) 	The fact that the work is performed continuously with no interruption or change in the manner or performance is a normal feature of transfers of undertakings but there is no particular importance to be attached to a gap between the end of the work by one subcontractor and the start by the successor -Allen [2000] IRLR 119 paragraphs 32-33”.

17.	It must be noted that, in addition to the passages which the Tribunal cited and we have not rehearsed in the TUPE Regulations, is the following:
 “3.	 A relevant transfer
 
(1) 	Subject to the provisions of these Regulations, these Regulations apply to a transfer from one person to another of an undertaking situated immediately before the transfer in the United Kingdom or a part of one which is so situated.
 (2) 	Subject as aforesaid, these Regulations so apply whether the transfer is effected by sale or by some other disposition or by operation of law.
 (3) 	Subject as aforesaid, these Regulations so apply notwithstanding—
(a) 	that the transfer is governed or effected by the law of a country or territory outside the United Kingdom;
(b) 	that persons employed in the undertaking or part transferred ordinarily work outside the United Kingdom;
(c) 	that the employment of any of those persons is governed by any such law.
 (4) 	It is hereby declared that a transfer of an undertaking or part of one—
(a) 	may be effected by a series of two or more transactions; and
(b) 	may take place whether or not any property is transferred to the transferee by the transferor”. 

18.	Although a transfer may take place in a series of transactions, a transfer may be effected by some disposition or by operation of law.  In other words, search for a transaction is not always the be-all and end-all.  What is important is to examine the factors set out in Cheesman and to decide whether there was an entity and whether it was continued in the hands of the putative transferee.  Then it would be easy to determine by application of those factors whether there has been a relevant transfer.  

19.	As to consultation, it appears to us that there are very limited circumstances in which a failure to inform or consult an employee representative or, here, a trade union, can be the subject of a complaint by an individual employee under Regulation 11.  

Conclusions
20.	In our judgment, Mr White is correct when he points to what would otherwise be clear findings of the existence of a business properly transferred under TUPE.  Passages we have cited from paragraphs 12.8 and paragraph 19 all point to that conclusion.  Nevertheless, the Tribunal has indicated that it lacked information about the nature of the transaction.  This, however, is the wrong approach, as we have suggested above.  What must occur is an examination of the factors set out in Cheesman.  It was not done in this case.  Although there has been no request pursuant to Judge Clark’s order for material to be put before us, we can well understand, as Mr White told us, that he did put material before the Tribunal that the licensed premises were continued in the hands of Mr Jeal.  

21.	We have decided that the case should be remitted to the same Employment Tribunal for it to apply the factors in Cheesman and for it to make a finding as to whether or not there was a relevant transfer on 11 October 2004.  Once it has done that, it will then be able to apply its reasoning which will be intact.  If there was a relevant transfer, we hold that the responsibility for the dismissal, which was unfair, will lie with Mr Jeal.  If there was no relevant transfer, then the judgment will stand and liability will remain with Project 90.  There is no challenge to the finding of unfair dismissal. The only issue for the Claimant is to find out which Respondent will pay compensation.  

22.	In practical terms, Ms Smith has indicated to us that it is more beneficial for a finding to be made against Project 90 and for that reason she, on Miss Oswald’s behalf, opposed this appeal.  But that may be a stereotypical view of the relationships between the parties here.  True it is, Project 90 is a limited company, but we know nothing of Mr Jeal.  The sums involved are not huge and it may well be that when this case is remitted, both Mr White and Mr Jeal may be able to come to some practical compromise, bearing in mind that there will be another hearing before this Tribunal, and that there is liability for unfair dismissal in the sum awarded, depending upon which answer the Tribunal gives.  

23.	We are satisfied that this judgment of the Employment Tribunal exhibits confusion and inconsistency which it can clear up once it has applied the law as we have directed.  The Tribunal did not appear to have been directed to any authorities and has not cited any and it will obviously be assisted by consideration of Cheesman.

24.	We then turn to the issue on consultation.  Our preliminary view is that there is no jurisdiction in the hands of an individual employee.  It may be of assistance for the Employment Tribunal to see our judgment in Mitie Group v Mullineaux [2005] UKEAT 0708/04/0402 and consider under what part of Regulation 10 or 11 this claim was made, identifying the nature of the breach and if it is of a failure to consult with the GMB, to say so or alternatively, to say precisely where the jurisdiction lies.  It may be that there is a simple solution to this, for orders made by this Tribunal have not found their way into our bundle including, we understand, some indication of the way the Claimant’s trade union representative was putting the case on consultation.  

25.	If the Tribunal on further examination considers that the Claimant has not shown that she is entitled, as a protected employee, to bring a complaint, then it will be bound to revisit its conclusions and the award of £520.  Alternatively, with the assistance of Ms Smith, it may well be that this matter can be resolved with further reference to the Employment Tribunal once she has consulted her client and considered any orders made by the Tribunal which we have not seen.

26.	We would very much like to thank Mr White and Ms Smith for the help they have given us today.  The appeal is allowed and there will be a controlled remission to the Employment Tribunal which will hold a hearing and which may hear additional evidence on the question of whether or not there was a relevant transfer. The finding of unfair dismissal and the award for that remain.