Appeal No. UKEAT/0423/06/LA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 17 November 2006
Judgment handed down on 21 December 2006

Before
HIS HONOUR JUDGE PETER CLARK
(SITTING ALONE)

CREST PACKAGING LTD (in administration) AND OTHERS	APPELLANT

1)	MR T BELL	RESPONDENTS
2)	MR J BREAKER
3)	MR K INGRAM
4)	MR D PACKHAM
5)	MR R PARRY
6)	MR R STEVENS	

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR J LADDIE
(of Counsel)
Instructed by:
Messrs DLA Piper Rudnick Gray Cary UK LLP
3 Noble Street
London EC2V 7EE	
For the Respondents	MR O SEGAL
(of Counsel)
Instructed by:
Messrs Thompsons Solicitors
Congress House
Great Russell Street
London
WC1B 3LW	

SUMMARY
Contract of Employment
Contract of Employment – Written particulars
Novation of contract of employment.  Effect of statutory statement of terms and conditions of employment.

HIS HONOUR JUDGE PETER CLARK
1.	This appeal raises broadly two issues, novation and perversity.  It arises in this way.  The Crest Packaging Group included, for present purposes, three companies; (1) Crest Packaging Ltd (Packaging), (2) Crest Flexible Packaging Ltd (Flexible) and (3) Crest Cartons Ltd (Cartons).  On 7 May 1985 these three companies were incorporated to acquire the assets and goodwill of Bowater Packaging Ltd (Bowater).  Bowater carried on business manufacturing packaging materials and cartons at premises in Gillingham, Kent.  The business was split into two divisions, Bowater Flexible Packaging Ltd (Bowater Flexible) and Bowater Cartons Ltd (Bowater Cartons).

2.	Following the acquisition, the business of Bowater was continued by Crest.  It was structured in this way: on 7 May 1985 Flexible purchased the assets of both Bowater Flexible and Bowater Cartons.  Shortly after 7 May 1985 the assets formerly owned by Bowater Cartons were transferred by Flexible to Cartons.

3.	In 2003 the Crest Group collapsed and all companies, including the three with which I am concerned, went into administration.  As a result the workforce lost their jobs.  Two hundred and sixty-seven employees presented claims to the Ashford Employment Tribunal in July 2003.

4.	The first issue to be decided was by whom the Claimants were employed.  It was of importance because whereas Packaging had significant assets in the form of property, Flexible and Cartons did not.  It is that issue which is now before me.  It is the fourth time that it has been heard; before a Chairman, Mr Sutton, sitting alone at Ashford on 22/23 March 2005; before Rimer J on appeal to this Appeal Tribunal on 18 November 2005; before a second Chairman, Mr Sprack, following remission by Rimer J on 3/4 May 2006, and now before me on appeal by Packaging against the reserved Judgment of Mr Sprack dated 25 May 2006.

5.	In order to render the case manageable, six test case Claimants were selected.  Three of the selected Claimants, Messrs Bell, Ingram and Parry, were employed by Bowater prior to May 1985 (the Bowater employees); the remaining three, Messrs Breaker, Packham and Stevens joined Crest after May 1985 (the Crest employees).

6.	Mr Sutton found that all six test Claimants were employed by Packaging.  In allowing the appeal by Packaging against that decision Rimer J held:

(1)	As to the Bowater employees, it being common ground that by May 1985 Messrs Parry and Bell were employed by Flexible and Mr Ingram by Cartons, the question was whether novation had taken place (Judgment, para 42) so that their employer became Packaging; if not, their employer was as identified above;
(2)	As to the Crest employees, that the Chairman had not provided adequate reasons to explain why their employer was Packaging.

Accordingly, the issue was to be re-tried before a different Chairman.

7.	Mr Sprack reached the same conclusion as Mr Sutton for the reasons promulgated with his Judgment of 25 May 2006.

Novation
8.	Inexplicably, despite Mr Sprack having read the lengthy judgment of Rimer J which identified the novation issue as key, he has not dealt with that issue, fully argued before him by Counsel appearing before me, in his Reasons.  That is common ground.  It is plainly an error of law not to do so.  Does that mean that the cases of the three Bowater employees must go back for a third hearing before yet another ET Chairman?  In my judgment it does not.

9.	As Mr Laddie submits, the Claimants were given the opportunity to lead evidence before Mr Sprack on the novation issue.  However, there was no oral evidence from the Claimants themselves that they had agreed to a novation, substituting Packaging as employer for Flexible and, in the case of Mr Ingram, Cartons.  There was no documentation indicating that such novation had taken place.  Mr Segal submits that I am in as good a position as the Chairman to infer novation from the facts found; Mr Laddie submits that in the absence of evidence to support a novation I should find that none took place.  These Claimants remained employed by Flexible and Cartons at the effective date of termination of their contracts of employment.  As a matter of law, I accept Mr Laddie’s submission.  Novation requires a subsequent binding contract and the consent of all parties.  I am not satisfied, on the evidence before the Chairman and facts which he found, that novation is made out.  Accordingly, I shall allow the appeal of Packaging in respect of the Bowater employees, and declare that Messrs Parry and Bell were employed at the material time by Flexible and Mr Ingram by Cartons.

Perversity
10.	Mr Laddie argues that the Chairman’s finding that the “Crest” employees Messrs Breaker, Packham and Stevens were employed by Packaging was legally perverse.  That is a high hurdle to surmount.  Yeboah v Crofton [2002] IRLR 634.  In my judgment he has failed to pass that test.

11.	In stating his conclusions (Reasons, para 21) Mr Sutton said:
“Messrs Breaker, Packham and Stevens were employees of ‘Packaging’ primarily because of the effect of the statements of terms and conditions of employment as set out above.”

12.	Under his Findings of Fact (para 9) Mr Sutton noted that Bowater Packaging Ltd issued statements of particulars to those three Crest employees.  Additionally, Mr Packham had pursued a personal injury action against Packaging which led to a consent order in the County Court in January 2002.  

13.	On appeal, Rimer J (para 43) held that such reasoning was inadequate.

14.	On remission I take the view that Mr Sprack did give adequate reasons for his finding that the Crest employees were employed by Packaging and that such a conclusion was permissible on the facts as found.

15.	Mr Laddie makes much of the original letters of appointment in these three test cases.  As the Chairman records, Mr Breaker was offered an appointment by Mr Hore, Personnel Manager for Packaging, Flexible and Cartons, on 22 November 1996; on 26 November he accepted an appointment as “plate-maker with Crest Cartons Ltd”.  I infer that the carbon copy of the offer letter dated 22 November was a copy of a letter written by Mr Hore on Cartons letter headed paper, since Mr Breaker replied to that Company.  Mr Packham commenced employment on 23 January 1995.  He too was sent a letter of appointment on Cartons headed paper.  There is no written acceptance by him within the papers.  Mr Stevens, who commenced employment on 17 January 1994, received a letter of appointment on Flexible headed paper dated 20 December 2003; he replied, accepting the position of production operative, to Mr Hore at Crest Flexible Packaging Ltd on 29 December 2003.

16.	In each case, after employment commenced, the three Crest employees were issued with Statutory Statements of terms and conditions of employment, as required by s1 Employment Rights Act 1996 (ERA).  In the case of Mr Breaker and Mr Packham, the document was issued by Packaging.  The name of Packaging also appears at the head of the Statement issued to Mr Stevens.  Each employee signed and dated the Written Statement to acknowledge its receipt.  The Statements did not thereby become written contracts of employment; see System Floors UK Ltd v Daniel [1982] ICR 54 (EAT), cf. Gascol Conversions v Mercer [1974] ICR 420 (CA).

17.	It seemed to me that a point a principle arose as to the effect of those Written Statements.  I heard argument on the point.  It was considered by Browne-Wilkinson P in Daniel (57 E – 58 B).  Having considered the earlier Divisional Court cases of Turiff Construction Ltd v Bryant (1967) 2 KIR 659 and Parkes Classic Confectionery Ltd v Ashcroft [1971] 8 ITR 43, the former President concluded (58 A-B):

“It seems to us, therefore, that in general the status of the statutory statement is this.  It provides very strong prima facie evidence of what were the terms of the contract between the parties, but does not constitute a written contract between the parties.  Nor are the statements of the terms finally conclusive: at most, they place a heavy burden on the employer to show that the actual terms of contract are different from those which he has set out in the statutory statements.”

18.	Pausing there, Mr Laddie raises the possibility that the wrong Company name appeared on the Statements by mistake; he submits that the identity of the parties is not a term of the contract of employment (not a point argued below) and that the proposition in Daniel, set out above (with which I respectfully agree) has no application here.

19.	I reject those submissions.  Mr Laddie cannot, on the one hand, argue that in the absence of novation being shown the Bowater employees’ employer remains as it was in May 1985 - thus contending that the identity of the employer is a material term of the contract - and then seek to argue in relation to the Crest employees that it is not.  I am quite satisfied that it is.  Further, Daniel was concerned with a Statutory Statement, not a contract of employment.  Section 1(3) ERA (and its predecessor legislation stretching back to the Contracts of Employment Act 1963) provides:

“The statement shall contain particulars of –
(a)	the names of the employer and employee,”

20.	I am thus satisfied that the identity of the employer is a material term of the contract of employment and that, by virtue of s1(3)(a) ERA, the employer is required by statute to identify himself in the Statutory Statements.  The reason is obvious.  It is to remove the sort of doubts which have surfaced in the present case.

21.	Thus, as a matter of law, the Chairman was, in my judgment, in the position of assessing whether Packaging had, on the evidence, discharged the “heavy burden” of showing that the actual term of the contract as to the identity of the employer is different from that set out in the Statutory Statement.

22.	Here, the Appellant faced a difficulty.  It called no oral evidence from those who managed the Crest Companies.  Thus there was no evidence to suggest that Packaging appeared by mistake in the Statements, as Mr Laddie suggested in argument.

23.	It seems to me that the high point of Mr Laddie’s argument consists of the respective letters of appointment and acceptances passing between the Crest employees and Mr Hore, referring to Companies other than Packaging.  However, those facts are not, Mr Laddie accepts, a “golden bullet” which in themselves discharge the burden placed on Packaging to show that the actual contractual term as to the employer’s identity differs from that shown on the Statements.

24.	I am satisfied that Mr Sprack took those facts into account in reaching his overall conclusion in the case of the Crest employees.  They are recited in his Reasons.  However, he did not limit his enquiry, as Rimer J found Mr Sutton had done earlier.  Based on his earlier Findings of Fact, Mr Sprack’s conclusions, so far as the Crest employees are concerned (at paras 81 – 93) satisfy me that he took into account the relevant factors, pointing towards and away from Packaging as the contractual employer, and reached a permissible finding that it rested with Packaging.  That finding, in my judgment, is consistent with the correct legal position, as stated by Browne-Wilkinson P in Daniel, that it was for Packaging to discharge the heavy burden placed upon it to show that the actual employer under the contract differed from that shown on the Statutory Statements.  That conclusion was not legally perverse; it was adequately reasoned.  The appeal, so far as the “Crest” employees Messrs Breaker, Packham and Stevens, accordingly fails and is dismissed.

Postscript
25.	Mr Sutton observed (Reasons para 21(b)(1)) that it would be irrational for pre-1985 employees to have a different employer from post-1985 employees.  That may also be the view of the former in the light of my judgment.  However, that is, I conclude, the necessary consequence of the proper application of the law to the facts in this case.