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URL: http://www.bailii.org/ew/cases/EWCA/Civ/1998/1294.html
Cite as: [1998] IRLR 577, [1999] ICR 276, [1998] EWCA Civ 1294, [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

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CLARK TOKELEY LTD (T/a SPELL BROOK LTD )

- v -

OAKES & ORS

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(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

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J U D G M E N T

(As approved by the Court )

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©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;

(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.