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Clark Tokeley Ltd (t/a Spell Brook Ltd) v Oakes & Ors [1998] EWCA Civ 1294 (27 July 1998)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/1998/1294.html
Cite as:
[1998] EWCA Civ 1294,
[1999] ICR 276,
[1998] IRLR 577,
[1998] 4 All ER 353
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IN
THE SUPREME COURT OF JUDICATURE
EATRF
97/0961/3
IN
THE COURT OF APPEAL (CIVIL DIVISION)
ON
APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
Royal
Courts of Justice
Strand
London
WC2
Monday,
27 July 1998
B
e f o r e:
LORD
JUSTICE BELDAM
LORD
JUSTICE MUMMERY
SIR
CHRISTOPHER STAUGHTON
-
- - - - -
CLARK
TOKELEY LTD (T/a SPELL BROOK LTD
)
-
v -
OAKES
& ORS
-
- - - - -
(Transcript
of the handed down judgment of
Smith
Bernal Reporting Limited, 180 Fleet Street,
London
EC4A 2HD
Tel:
0171 421 4040
Official
Shorthand Writers to the Court)
-
- - - - -
MR
G PRICHARD
(Instructed by Messrs Taylor Walton, Beds LU1 2PL) appeared on behalf of the
Appellant
MISS
A MORGAN
(Instructed by Messrs Kidd Rapinet, Buckinghamshire HP20 2PX) appeared on
behalf of the Respondent
-
- - - - -
J
U D G M E N T
(As
approved by the Court
)
-
- - - - -
©Crown
Copyright
Monday,
27 July 1998
J
U D G M E N T
Lord
Justice Mummery:
Introduction
This
appeal turns on the correct construction and application of statutory
provisions for the computation of periods of continuous employment in the
context of a transfer of an undertaking. These provisions are now contained in
the Employment Rights Act 1996, which consolidates the Employment Protection
(Consolidation) Act 1978, as amended (the 1978 Act), and other individual
employment legislation. The 1996 Act commenced on 22 August 1996. As the
relevant events in this case occurred before then, the 1978 Act applies.
An
employee who has been “continuously employed" for a period of not less
than 2 years ending with the effective date of termination has the right not to
be unfairly dismissed by his employer: Sections 54 and 64 of the 1978 Act.
Section 151 of the 1978 Act states:-
"(1)
References in any provision of this Act to a period of continuous employment
are, except where provision is expressly made to the contrary, to a period
computed in accordance with the provisions of this section and Schedule
13......."
Schedule
13 is headed "Computation of period of employment". A preliminary provision in
sub-paragraph 1(3) states:-
"A
person's employment during any period shall, unless contrary is shown, be
presumed to have been continuous."
The
ensuing paragraphs deal with continuity in various situations, including
periods when there is no contract of employment and when there are intervals in
employment.
Paragraph
17 (now embodied in section 218(2) of the 1996 Act) is under the heading
"Change of employer." The material parts provide:-
"(1) Subject
to this paragraph and paragraphs 18 and 18A, the foregoing provisions
of this Schedule relate only to employment by the one employer.
(2) If
a trade or business or an undertaking (whether or not it be an undertaking
established by or under an Act of Parliament) is transferred from one person
to another, the period of employment of an employee in the trade or business or
undertaking at the time of the transfer shall count as a period of employment
with the transferee, and the transfer shall not break the continuity of the
period of employment."
The
remaining paragraphs under "Change of employer" cover other situations, such as
the substitution of an corporate employer by or under an Act of Parliament, the
death of an employer and employment by an "associated employer".
This
case is about an employee (Mr Anthony Oakes) who
(a) was
employed in an undertaking for a continuous period of more than 2 years;
(b) was
dismissed from his employment shortly before the completion of the transfer of
that undertaking;
(c) entered
into a new contract of employment with the transferee of the undertaking;
(d) and
was dismissed by the transferee less than 2 years after entering into that
contract of employment.
The
key question is: does such an employee have a right not to be unfairly
dismissed by the transferee? On the facts of this case both the Industrial
Tribunal and the Employment Appeal Tribunal answered that question in favour of
the applicant. Mr Anthony Oakes was dismissed by the transferee of the
undertaking, in which he had been employed for nearly 6 years, only 9 days
after he had entered into a new contract of employment with the transferee.
The
transferee now appeals to this court with the leave of the Employment Appeal
Tribunal. The debate in the Appeal Tribunal and in this Court has focused on
the words "at the time of the transfer" in sub-paragraph 17(2) of schedule 13.
The construction of that expression in equivalent earlier provisions was last
considered by this Court nearly 20 years ago in
Teesside
Times Limited -v- Drury
[1980] ICR 338, when each member of the Court (Stephenson, Goff and Eveleigh
LJJ) gave differing obiter opinions. This case demands a decision on the point
of construction. It will be necessary to examine in detail the 3 judgments in
Teesside,
and to consider subsequent decisions of the Employment Appeal Tribunal on the
construction of sub-paragraph 17 (2).
Role
of the Court of Appeal
This
Court must not lose sight of the statutory limits on its jurisdiction to
entertain an appeal in a case originating in an Industrial Tribunal. The
Industrial Tribunal has been frequently described as an "industrial jury."
The predominant lay element in its composition ensures that it has relevant and
invaluable experience in industrial disputes. It is for that tribunal to hear
the evidence and to make findings of fact . An appeal to the Employment Appeal
Tribunal and from there to this Court only lies on a question of law. The
question for this court is whether the appellant has demonstrated that the
decision of the Industrial Tribunal is erroneous in law.
The
Facts
In
May 1990 Mr Oakes began his employment with Biss Vehicles Ltd (BVL) as a sales
manager. BVL and an associated company, Biss Truck Hire Ltd (BTHL), were owned
by members of the Biss family. They carried on businesses (under franchise) of
the sale, lease, hire and repair of Mercedes Benz motor vehicles and trucks
from adjoining premises at Spellbrook in Hertfordshire. Mr Oakes progressed
from sales manager to general manager in April 1993 and to "Dealer Principal"
in December 1994, at a salary of £35,000 per annum plus substantial
commissions.
In
the latter part of 1995, when the franchises were about to end, and in the
early months of 1996 2 employees of Mercedes Benz (UK) Ltd (MB), Mr Clark and
Mr Tokeley, made offers to purchase BVL and BTHL, neither of which were
financially sound. There were detailed negotiations for the sale and purchase
of the businesses as going concerns. It was envisaged by the parties that the
proposed disposals of the businesses would be "transfers" within the meaning of
the Transfer of Undertakings (Protection of Employment) Regulations 1981
(TUPE).
On
1 March 1996 Mr Richard Elwell was appointed by MB to act as Receiver to
safeguard vehicles belonging to it and forming part of BVL's and BTHL's stock
at Spellbrook.
On
5 March 1996 Mr Stephen Hancock was appointed by BVL's bankers to be an
Administrative Receiver under the terms of a bank debenture over the assets of
the Biss companies.
On
7 March 1996 Mr Langley was appointed as Liquidator of BVL and BTHL by the
shareholders in those companies in voluntary liquidation.
On
14 March 1996 the Liquidator dismissed Mr Oakes and all the other employees of
BVL and BTHL. They all later made claims in the Industrial Tribunal.
The
Industrial Tribunal made these findings in paragraph 13 of its decision:-
"(15)
Although the appointment of the Liquidator frustrated the coming into being of
the sale agreements on the terms which had earlier been discussed with the Biss
family, negotiations for the sale of the companies were resumed by the
Administrative Receiver, Mr Hancock and Mr Jonathan Clark. On 21 March 1996 an
agreement for the sale and purchase of the assets of BVL was signed and on 11
April in the same year a similar agreement for BTHL was signed.
(16) Mr
Oakes commenced employment with Clark and Tokeley (C&TL) on Thursday 21
March. He worked for that company on Friday 22 March being sent to Milton
Keynes to collect a vehicle. He was paid for that day and produced a wage slip
confirming that payment.
(17) The
intervening period between 14 March, the date of dismissal of the applicants,
and 21 March, the purchase date by C&TL, the business although in limbo so
to speak, "ticked over", albeit with only a handful of employees, including Mr
Oakes. Mr Oakes had been asked to stay on by the Liquidator to provide a
degree of continuity. During the interregnum Mr Oakes and others carried on
with their normal duties in so far as that was possible in the changed
circumstances. (It is agreed by counsel that the request to stay on was made
by the Receiver, not the Liquidator).
(18) The
assets disposed of by the sale agreements included securities, goodwill, spare
parts, plant and machinery, work in progress and the benefit of the companies
existing contracts.
(19) The
purchasers of C&TL were granted a new franchise by MB and the new agreement
covered a larger area than had been the case under the earlier Biss franchises.
All the applicants were offered re employment and save for the applicant Mr
Oakes, resumed work on 22 March on the same terms as they had previously
enjoyed with BVL and BTHL.
(20) Mr
Oakes' terms of employment were different from those which he had received from
BVL. He was subsequently dismissed by C&TL on 2 April 1996."
In
these circumstances Mr Oakes claimed that he was unfairly dismissed by C&TL
from his position as sales director. He contended that his period of employment
with BVL was continued with C&TL in such a way as to allow him to compute
his total period of employment as beginning in May 1990 and ending on 2 April
1996.
On
12 June 1996 he presented to the Industrial Tribunal a complaint of unfair
dismissal by C&TL. In their Notice of Appearance dated 9 July 1996
C&TL took the point that Mr Oakes had no continuity of employment. His
contract of employment with BVL terminated when BVL went into liquidation on 6
March 1996. He was made redundant by the Liquidator. He was employed by
C&TL for only 9 days. He had not been continuously employed by them for
the period of 2 years or more ending with the effective date of termination on
2 April 1996. Accordingly, by reason of section 64 of the 1978 Act, he was not
entitled to compensation for unfair dismissal under section 54 of that Act.
Decision
of the Industrial Tribunal
On
22 and 23 October 1996 the Industrial Tribunal at Bury St Edmunds held a
preliminary hearing of the application by Mr Oakes for unfair dismissal and of
26 applications by other employees of BVL and BTHL, who claimed that there had
been transfers of undertakings to C&TL and that their contracts of
employment had transferred to C&TL under Regulation 5 of TUPE. On those
claims the Industrial Tribunal unanimously held that there had been transfers
of the undertakings in which the applicants had been employed, but that the
contracts of employment of those applicants were not transferred to C&TL.
Although
this appeal is not concerned with those other applicants or with TUPE those
conclusions should be noted in passing, as arguments advanced on behalf of
C&TL on this appeal frequently harked back to TUPE. The Industrial
Tribunal's conclusions on the employees of the two companies affected by the
transfers were that the applicants were all dismissed by the Liquidator on 14
March 1996 before the sale agreements to C&TL were concluded; that they
were not employed in the undertaking "immediately before the transfer"; that
the Liquidator who dismissed the applicants had nothing to do with the
subsequent transfer of the two businesses; that it was "unrealistic to suggest
that he dismissed the applicants for any reason connected with their transfer";
that regulation 5(2) of TUPE had no application to and did not affect the
position of the applicant employees; that the liability to pay redundancy
payments arising from the dismissals on 14 March did not pass to C&TL; and
that that responsibility remained with the Secretary of State for Trade and
Industry, as both transferor companies were insolvent.
The
purpose of the preliminary hearing of Mr Oakes' application was to decide
whether he had been continuously employed for a sufficient period to entitle
him to make his application for unfair dismissal against C&TL. On that
issue the tribunal reiterated that Mr Oakes had not been dismissed by the
Liquidator for a reason connected with the transfer of BVL (paragraph 24), but
held that, despite the gap in the employment of Mr Oakes with BVL and his
employment with C&TL, the period of his employment in the undertaking of
BVL counted as a period of employment with C&TL. That was in excess of the
necessary 2 year qualifying period.
The
conclusions are explained in paragraph 30 of the Extended Reasons sent to the
parties on 25 November 1996:-
"In
the present case we cannot say with certainty what motive may have prompted the
Liquidator's decision to dismiss Mr Oakes or the other employees. Nor do we
need to know because we are told it matters not. The dismissals occurred during
the course of the transfer of BVL to C&TL. They were therefore an incident
in the negotiations leading to the transfer. Thus they were related to the
"machinery" or negotiations for the transfer. Following therefore the
decisions in the
Macer
and
Justfern
cases, it follows that the position of Mr Oakes during the period between 14
March which was the date of his dismissal and 21 March which was the date of
his re-engagement by C&TL and regardless of what he was doing during that
time cannot affect the continuity of his employment. In fact, we are told and
we accept, that during those days Mr Oakes continued to attend the premises at
Spellbrook and to carry on the activities of the business which was in the
process of transfer."
For
those reasons the tribunal held that it had jurisdiction to hear Mr Oakes'
claim for unfair dismissal against C&TL.
Decision
of the Employment Appeal Tribunal
C&TL
appealed to the Employment Appeal Tribunal, who dismissed the appeal on 9 June
1997 and granted leave to appeal to this court on the 2 July 1997. In a
valuable judgment prepared by Mr Justice Lindsay the Appeal Tribunal upheld the
Industrial Tribunal's decision that it did have jurisdiction to hear Mr Oakes'
claim for unfair dismissal.
I
shall highlight some key passages in the transcript of the judgment:-
(1)
TUPE
"We
are not concerned in this appeal by C&TL with the TUPE
regulations............. We pause only to add, as the legislation we will need
to consider in detail is not that of TUPE and has a quite distinct purpose,
that it does not follow, because a transition ( to use a neutral word) is or is
not "a relevant transfer" or is to be treated as having taken place at some
particular date for the purposes of TUPE, that the same conclusions must be
arrived at under the different legislation to which we shall turn. We are not,
then, concerned with TUPE....." (p.4C-E).
I
agree. The same is true on this appeal. This point must be emphasised at the
outset, because the written and oral arguments of Mr Prichard, on behalf of
C&TL, often echoed his successful submissions in the Industrial Tribunal on
the TUPE point in the cases of the other 26 applicants. This appeal is not
concerned with the 26 other applicants or with TUPE. Mr Oakes does not contend
that his contract of employment with BVL was transferred to C&TL by reason
of Regulation 5 of TUPE. He does not need to pursue that line of argument, as
he entered into a new contract of employment with C&TL on 21 March 1996.
Mr
Prichard accepts that there was a relevant transfer of an undertaking within
the meaning of TUPE and also that there was a transfer of an undertaking, trade
or business from BVL to C&TL within sub- paragraph 17(2). Those concessions
do not, however, establish a relevant link between the construction and
operation of TUPE and the continuity provisions of Schedule 13 for the
computation of periods of employment. The date of the relevant transfer of BVL
for the purpose of TUPE may have been 21 March 1996 (see the speech of Lord
Oliver in
Litster
-v- Forth Dry Dock Co Ltd
[1989] ICR 341 at p.362E-G in its reference to "the status of the employee
vis-a-vis his employer at the very instant at which the employer's business is
transferred" - "au moment du transfert" in the French text of the EC Directive
implemented in TUPE). But it does not follow that "the time of the transfer"
of an undertaking for the purposes of regulation 5 of TUPE, which was made to
implement the provisions of the Acquired Rights Directive (77/187/EEC),is the
same under sub-paragraph 17(2), which originates in legislation dating from
1963, unconnected with the EC Directive and antedating the introduction of the
right not to be unfairly dismissed in 1971. (cf.
Brook
Lane Finance Co Ltd v. Bradley
[1988] ICR 423 at p.430H, following
Secretary
of State v. Spence
[1986] ICR 651, which was later distinguished by the House of Lords in
Litster)
(2) Requirement
of Employment
As
observed in the judgment, there are references in sub-paragraph 17(2) to "an
employee in the trade or business or undertaking" and to “the period of
employment of an employee" at the time of the transfer. The judgment
continues(at p.7G):-
"There
are two possible relevant functions of such references to time. One is to
indicate a time as at which an employee has to be in a described employment;
the other is to indicate the point of time as at and down to which the
employee's period of employment with the previous employer is to be computed
before its metamorphosis into being treated as employment with the successor."
As
a matter of construction the Employment Appeal Tribunal held (p.10D) that:-
"...
paragraph 17(2) bridges no gaps in employment and therefore if an employee has
ceased before the transfer to be in employment in the trade or business or
undertaking so that he is not such at the time of the transfer then his earlier
period of employment does not count as a period in the employment of the
transferee."
On
this appeal Miss Morgan, on behalf of Mr Oakes, repeated the submission
unsuccessfully put to the Employment Appeal Tribunal that there is no
requirement in sub-paragraph 17(2) that the employee must be employed by the
transferor at the moment or time of the transfer to enjoy the benefit of the
provision. This Court is not bound by authority to accept that submission and I
agree with the Employment Appeal Tribunal that, as a matter of construction,
Miss Morgan's submission should be rejected. On its natural and ordinary
meaning sub-paragraph 17(2) does not solely indicate the time as at and down to
which the period of employment with the previous employer is to be computed:
the expression "at the time of the transfer" relates
both
to the period of employment at the time of the transfer
and
to the relevant person being an employee in the undertaking at that time.
(3) The
Key Question
The
Employment Appeal Tribunal correctly stated that the conclusion on point (2)
above is not the end of the matter. The critical issue is accurately stated in
these terms (p.10F):-
"Whether
Mr Oakes was an employee in the business at the time of the transfer so that
his employment with BVL may count as employment with C&TL for the purposes
of Section 64 depends on whether "the time of the transfer" in sub-paragraph
17(2) refers only to a single point in time or can refer to a longer period and
whether, accordingly, Mr Oakes was employed by BVL at that point or, if
appropriate, within or throughout that longer period."
The
focus in this appeal has been on the ruling of the Employment Appeal Tribunal
that, as a matter of construction and free from authority, the expression "at
the time of the transfer" in sub-paragraph 17(2) is not be confined to a
specific moment in time, such as when a signature is put on a written transfer
agreement, but can "in appropriate cases be a reference that describes a
greater period." The Appeal Tribunal reasoned that a transfer of an
undertaking is capable of being regarded as spread over a period with a
beginning and an end (p.11F):-
"That
there is a great breadth of possible situations that may be covered within the
word "transfer" unless it is cut down by the addition of further words is so
obvious that it is reasonable to assume, in the absence of words cutting it
down, that such great breadth is intended to be covered. The Industrial
Tribunal here spoke, correctly in our view, of "the process of transfer" and
"the course of transfer.""
The
Appeal Tribunal reviewed the relevant facts found by the Industrial Tribunal
about the negotiations for a transfer starting in late 1995 and the subsequent
appointments of Receivers and the Liquidator. They concluded that, having
regard to that "process" or "course" of the transfer, the transfer began
earlier than 14 March 1996 and that Mr Oakes was still employed by BVL "at the
time of the transfer". There was therefore no disqualifying gap in the
continuity of employment between Mr Oakes' dismissal on 14 March and the time
of the completion of the transfer to C&TL on 21 March. Mr Oakes was, within
the meaning of sub-paragraph 17(2), an employee in the undertaking" at the time
of the transfer."
Miss
Morgan supported those conclusions. Mr Prichard, on behalf of C&TL,
submitted that they embodied the legal error infecting the decision of the
Industrial Tribunal. He cited authorities in support of his contentions.
(4) The
Authorities
The
Employment Appeal Tribunal held, correctly in my judgment, that the authorities
do not preclude or weaken the tribunal's view that, for the purposes of
sub-paragraph 17(2), "the transfer" of an undertaking can properly be regarded,
in an appropriate case, as a process spread over a period and that "the time of
the transfer" can correspondingly be of some duration.
The
authorities reviewed by Mr Justice Lindsay are the
Teesside
case and the following decisions in the Employment Appeal Tribunal:
Macer -v- Abafast Ltd
[1990] ICR 234;
Justfern
Ltd -v- Skaife D'Ingerthorpe
[1994] ICR 286 and
A
& G Tuck Ltd -v-Bartlett
[1994] ICR 379. Reference was also made to the Employment Appeal Tribunal
decision in
Secretary
of State for Employment -v- Cohen
[1987] ICR 570.
The
position is that there is no decision binding on this Court, but the obiter
dicta of the three Lords Justices in the
Teesside
case and the subsequent decisions of the Employment Appeal Tribunal provide
valuable assistance for the resolution of this appeal.
The
Appellants' Submissions
Mr
Prichard repeated the main submissions made by him to the Employment Appeal
Tribunal and developed further arguments on "the time of transfer" point. He
emphasised the following points:-
(1) The
presumption of continuity of employment in sub-paragraph 1 (3) of schedule 13
does not apply to the "Change of employer" provisions in paragraph 17. As
stated in sub-paragraph 17(1), that provision along with all the other
foregoing provisions of the Schedule "relate only to employment by the one
employer." The transfer of undertakings provisions in sub-paragraph 17(2)
relate to employment by 2 employers-the transferor and the transferee. This
was accepted by Mr Justice Scott in his judgment in
Cohen
(supra) P.573D-H and 575G-H, but was overlooked in the later decisions of the
Employment Appeal Tribunal. In
Macer
-v- Abafast
(supra) the tribunal erroneously relied on the presumption of continuity in
paragraph 1 (3) in a paragraph 17 case (page 242G-H). A similar error was
repeated in the judgment of the Appeal Tribunal in
Justfern
Ltd-v- Skaife D'Ingerthorpe
(supra).
That was another paragraph 17 case in which the tribunal relied on
sub-paragraph 1(3) at p.292F in support of the proposition that "the liberal
construction accorded with the evident policy of the legislation in preserving
continuity of employment." These policy assumptions are not in fact supported
by the presumption in sub-paragraph 1(3). That error considerably weakened the
support for Mr Oakes' case on the authorities.
(2) The
"time of the transfer" should not be stretched, either generally or in the
circumstances of this case, to embrace antecedent negotiations for the
transfer. A transfer of an undertaking takes place when the new owner "is let
into possession and begins to carry on the business on his own account and at
his own risk":
Teesside
(supra) per Goff LJ at p.355B. This approach accords with the strict analysis
of the word "transfer" adopted by the Industrial Tribunal in determining the
TUPE point on which it held that the dismissal of the employees of BVL by the
Liquidator on 14 March 1996 was not by reason of the transfer on 21 March 1996.
The plain fact is that Mr Oakes was dismissed without notice by the Liquidator
before
the transfer. He was then unemployed for a week. He was then taken on by
C&TL under a new contract. Mr Prichard submitted that the decision that Mr
Oakes was an employee of BVL "at the time of the transfer" within sub-paragraph
17(2) was inconsistent with the conclusion of the Industrial Tribunal that the
case of
Litster
did not apply. He also contended that the reason or motive for the dismissal
was as relevant to the consideration of sub-paragraph 17(2) as it was for
deciding whether regulation 5 of TUPE applied.
(3) If, contrary to his primary submission, the time of the transfer
could include the antecedent negotiations, then the facts found in this case
are insufficient to support the conclusion of the Industrial Tribunal and the
case should be remitted to the Industrial Tribunal to find further facts on the
question of Mr Oakes' employment by BVL at the time of the transfer.
(4) An argument was also developed on the relevance of the final words
of sub-paragraph 17 (2) to the construction of the earlier expression "at the
time of the transfer". Sub-paragraph 17(2) concludes:-
"and
the transfer shall not break the continuity of the period of employment."
It
was submitted that the purpose of these words is to negative the common law
rule that the transfer of the undertaking would constitute a repudiation of the
contract of employment of an employee in the undertaking. In
Litster
(Supra) at p.363A-B Lord Oliver stated that a transfer of an undertaking
"....
operates as a unilateral repudiation by the employer of his obligations under
the contract and thus as a dismissal of the employee from his service. Because
the relationship between the employer and the employee is of an essentially
personal nature, the repudiation severs the factual relationship resulting from
the contract, since the primary obligations on both sides are no longer capable
of being performed. The contract itself, however, is not, strictly speaking,
terminated but remains in being and undischarged so far as the enforcement of
secondary obligations are concerned."
Relying
on this contractual analysis Mr Prichard contended that the word
“transfer" in the final part of sub-paragraph 17(2) must be given a
narrow construction: in that context it refers not to a process but to a
specific event occurring at a particular point in time and stipulates that that
event shall not operate as a repudiation of the employment contract at common
law and so break the continuity of the period of employment. If "transfer"
refers to an event occurring at a moment of time in that part of the
sub-paragraph, it should be given the same meaning in the phrase "at the time
of the transfer" earlier in the same sub-paragraph. On this analysis
sub-paragraph 17(2) is not concerned with preserving continuity of employment,
but only with ensuring that the transfer itself does not break continuity of
employment. The continuity of Mr Oakes’ employment was broken not by the
transfer of the undertaking on 21 March 1996, but by his dismissal by the
Liquidator on 14 March 1996: at that point "the clock stopped running" At the
time of the transfer on 21 March he had no relevant period of employment in the
undertaking which could continue into his new employment with C&TL: he was
"back to square one" with C&TL, against whom he had contractual rights only
(eg notice).
In
brief, Mr Prichard submitted that Mr Oakes' rights and remedies (if any) are
against the transferor-BVL- or against the Secretary of State, as statutory
guarantor in the case of an employer's insolvency, but not against his
client-C&TL- as transferee. This Court should substitute its decision for
that of the Industrial Tribunal and declare that Mr Oakes lacks sufficient
qualifying service to bring a claim for compensation for unfair dismissal
against C&TL; alternatively, the case should be remitted to the Industrial
Tribunal to find further facts and to reconsider the preliminary question
whether Mr Oakes was an employee of BVL "at the time of the transfer".
Conclusion
There
is no error of law in the decision of the Industrial Tribunal. Its full
findings of fact enable this Court to determine the appeal without the need to
remit the case. I agree with the reasoning of the Employment Appeal Tribunal on
the construction of sub-paragraph 17(2) and with its application of the law to
the facts found by the Industrial Tribunal.
The
particular considerations leading me to the conclusion that this appeal should
be dismissed are as follows:-
(1) The
divergent views of the members of the Court of Appeal in
Teesside,
before whom the point of construction was fully argued by counsel experienced
in the field of employment law, indicate that the expression "at the time of
the transfer" in sub-paragraph 17(2) is reasonably capable of more than one
meaning. On the one hand, Goff LJ favoured the narrower construction on which
Mr Prichard relies. In his judgment at p.354H-355D he rejected as "unrealistic
and too uncertain" the submission that a transfer for the purposes of these
provisions is "an operation which may take place over a long period, beginning
with the inception of negotiations or at least as soon as the parties have
reached a firm understanding in principle."
He said at p.355A:-
"One is directed by the paragraph to look to "the time of the transfer", which
must I think refer to the moment when the transaction of transferring the
business from one owner to another is effected, or such short period as is
necessary to enable that to be carried out."
He
added, however, at p.355B that he did not think that
"that
moment or period is necessarily the time when legal
instruments of transfer are executed, and, if it be a sale, the price is paid
or secured, or perhaps earlier when a binding and enforceable agreement is
entered into. If the transferee is let into possession and begins to carry on
the business for his own account and at his own risk, I would think that that
would be the time of transfer."
Even
though he took the narrower view, he expressly kept open the point that a gap
of a day or two might not be fatal where it could be seen that the old
employment, the new employment and the transfer of the business are all closely
associated: see p.355C-D.
(2) On
the other hand, Stephenson and Eveleigh LJJ took a broader view. Stephenson LJ
at p.353F-H hesitantly expressed this view on the expression of "at the time of
the transfer":-
"I
can, however, go no further than to indicate my opinion that there is no one
stage in the process of transferring a trade or business or undertaking which
can be excluded from the time of the transfer by any hard or fast rule, but the
question when a trade, business or undertaking is transferred or what is the
time of its transfer, must be a question of fact and degree to be answered by
Industrial Tribunals in the light of common sense and their knowledge of trade
and industry applied to all the circumstances of the particular case."
He
added at p.353H that he did not see
"...how
the mere opening of negotiations for a transfer could itself be a transfer so
that the time of the transfer could begin to run then."
Nor
could he accept that any step in furtherance of a transfer in the future can be
regarded as part and parcel of a transfer already in being.
Although
Eveleigh LJ based his judgment on the view that the period of employment of an
employee in the trade or business at the time of transfer meant the period
vested in him at the time of the transfer, even though he was
not
an employee at that time, he agreed with the approach of Stephenson LJ to the
words "at the time of the transfer." He said at p.358C-E:-
"The
transfer proceedings may take a few weeks. It may be difficult to select a
point in time at which one can say the business was transferred. Those
problems have been referred to in the judgments already delivered and I would
adopt what Stephenson LJ has said on that matter."
He
added, however, that he doubted whether that was a vital issue in that case for
determining the period of employment. He said:-
"The
period of employment to be carried forward will be that which existed at the
date of dismissal. It will be added to that which begins on the date of
re-engagement."
(3) As it appears from
Teesside
(supra) that the expression "at the time of the transfer" is reasonably capable
of more than one meaning (a moment of time
or
a period of time) this Court should attempt to resolve that ambiguity in a
manner consistent with the purpose of these provisions and with regard to the
consequences of the alternative constructions. Those considerations lead
clearly to the conclusion that this Court should adopt the construction of "at
the time of the transfer" favoured by Stephenson LJ in
Teesside.
Sub-paragraph 17(2) is in a group of a provisions for the computation of
periods of continuous employment in the context of qualifying for employment
protection under the 1978 Act. The evident purpose of those provisions is to
provide that a period of continuous employment may exist for the purposes of
the Act, even though a person may at a particular moment of time not be in
employment: there may be intervals or gaps in employment, which do not prevent
the period of employment from being continuous.
(4) The
expression "at the time of the transfer" in paragraph 17(2) is used in the
context of the transfer of a "trade or business or an undertaking" from one
person to another. A trade or business or an undertaking will usually be a
going concern of some complexity giving rise to different considerations than
a simple transfer of a piece of real or personal property. The trade, business
or undertaking may comprise personal and real property, stock-in trade,
incorporeal property, such as goodwill and work in progress, the benefit of
existing contracts and the employees themselves. The completion of the transfer
of these different elements of the trade, business or undertaking may occur at
different times. Such a transfer is more in the nature of a process extending
over a period of time than an event timed to take place only at a particular
moment in time. Further, as Stephenson LJ observed in
Teesside(supra)
at p.352B, the "actual state of affairs" rather than “legal and technical
considerations" (eg the execution of documents) are what is known to the
employee and make it easier for him to identify the time of transfer.
(5) If sub-paragraph 17(2) were construed in the sense contended for by
C&TL, the fortuitous time-tabling or structuring of the manner or machinery
of transfer of an undertaking would, if it did not ensure that the employee was
still in the transferor's employment at the precise moment of the completion of
the formalities of transfer, deprive a long serving employee in the undertaking
of employment rights acquired by service in that undertaking. A gap in two
employments in the same undertaking, however short in length and whether
ineptly, arbitrarily or expertly engineered, would, on a transfer to, and on
the continuation of the undertaking by, the new employer, result in the loss of
a valuable accrued right not to be unfairly dismissed. The employee would find
himself in exactly the same legal position with the new employer-transferee as
if he had ceased to be employed in the undertaking altogether and had gone to
work for a different employer in a totally unconnected trade, business or
undertaking. It is, in my judgment, probable that the purpose of Parliament, in
legislating for the computation of a period of continuous employment under
sub-paragraph 17(2), was to avoid, not to achieve, this result in the case of
an employee employed by the transferee in the same undertaking after the
completion of the transfer.
On
that construction, the Industrial Tribunal made no error of law. It treated the
transfer in this case as a process and concluded that the dismissal of Mr Oakes
occurred in the course of that process. The true construction of sub-paragraph
17(2) justified that approach. There was sufficient evidence on which a
reasonable tribunal could conclude that, as a matter of fact, Mr Oakes was an
employee of BVL at the time of the transfer. There is no appeal against a
finding of fact.
For
all those reasons I would dismiss this appeal.
Sir
Christopher Staughton
I
agree that this appeal should be dismissed for the reasons given by Mummery LJ.
In particular, I agree that the expression "the time of the transfer"
may
refer to quite a significant period of days, or even weeks. That will not
necessarily be the case. The whole process of transferring a trade or business
or undertaking might take no more than a day; but I doubt if it could ever be
confined to a point of time. It refers not to the instant when property is
conveyed by one party to the other, but the process by which that result is
achieved.
In
this case Mr Oakes was still an employee of the business when the transfer
began. It seems that he did not remain an employee throughout the time of the
transfer, since he was dismissed on 14th March and the transfer was not
completed until 21st March. But I would not regard paragraph 17(2) of Schedule
13 as referring only to a person who is an employee
throughout
the time of the transfer. Instead I would give it a benevolent, or at any rate
a sensible, interpretation, and hold that it refers to a person who is an
employee during any part of the time of the transfer.
Lord
Justice Beldam
I
too agree that this appeal should be dismissed.
To
decide whether Mr Oakes had been “continuously employed” for two
years before his employment was terminated by the appellants, the Industrial
Tribunal had to decide whether “at the time of the transfer” he was
an employee in the business acquired by the appellants. Unless the words
“at the time of the transfer” are to be regarded as being
equivalent to “the moment of completion of the legal formalities of
transfer” the Tribunal had to decide as a question of fact whether in the
circumstances of the particular case the employee was employed during the
period the transfer was taking place. I agree with the observations of
Stephenson L.J. in
Teesside
Times Ltd. -v- Drury
[1980] ICR 338 at p.352 that in legislation of this type the transfer of a
business is more naturally regarded as the actual state of affairs than as the
legal process of transfer and prefer that approach for the reasons stated by
Mummery L.J. in his judgment. Accordingly I agree that in the circumstances of
this case the Industrial Tribunal could on the evidence conclude that Mr Oakes
was an employee at the time of the transfer and that his service with BVL and
with the appellant was to be regarded as continuous. In my view the Industrial
Tribunal made no error of law.
ORDER: Appeal
dismissed with costs; leave to appeal to the House of Lords refused.