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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Lightways (Contractors) Ltd v Associated Holdings Ltd [2000] ScotCS 17 (21 January 2000)
URL: http://www.bailii.org/scot/cases/ScotCS/2000/17.html
Cite as: [2000] IRLR 247, [2000] ScotCS 17, 2000 SC 262
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SECOND DIVISION, INNER HOUSE, COURT OF SESSION
|
Lord Justice Clerk Lord Hamilton Lord Morison
|
0/161/16B/98 OPINION OF THE LORD JUSTICE CLERK in APPEAL under section 37 of the Employment Tribunals Act 1996 (formerly styled the Industrial Tribunals Act 1996) by LIGHTWAYS (CONTRACTORS) LIMITED Appellants; against ASSOCIATED HOLDINGS LIMITED Respondents: _______ |
Act: Grant Hutchison; Biggart Baillie (Appellants)
Alt: Truscott, Q.C.; Macroberts (Respondents)
21 January 2000
I am in full agreement with the opinion of Lord Hamilton and accordingly agree that this appeal should be refused.
SECOND DIVISION, INNER HOUSE, COURT OF SESSION
|
Lord Justice Clerk Lord Hamilton Lord Morison
|
0/161/16B/98 OPINION OF LORD HAMILTON in APPEAL under section 37 of the Employment Tribunals Act 1996 (formerly styled the Industrial Tribunals Act 1996) by LIGHTWAYS (CONTRACTORS) LIMITED Appellants; against ASSOCIATED HOLDINGS LIMITED Respondents: _______ |
Act: Grant Hutchison; Biggart Baillie (Appellants)
Alt: Truscott, Q.C.; Macroberts (Respondents)
21 January 2000
This is an appeal under section 37 of the Employment Tribunals Act 1996 (formerly styled the Industrial Tribunals Act 1996) from a decision of the Employment Appeal Tribunal given on 17 November 1998, leave to appeal having been granted on 4 December 1998. By that decision the Employment Appeal Tribunal refused an appeal by the present appellants from a decision dated 9 April 1998 of an employment tribunal (then styled an industrial tribunal) which held on a preliminary issue that there had been a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE"). The employment tribunal was constituted by the chairman sitting alone.
As from 1 April 1993 the present respondents entered into a contract with Strathclyde Regional Council for the provision of street lighting maintenance. The contract was to run for four years. In the course of that period local authority reorganisation occurred, the practical effect of which was that the newly constituted Renfrewshire Council succeeded as employer to that part of the contract which related to lighting maintenance in Renfrewshire.
In 1997, before the expiry of that contract, Renfrewshire Council invited tenders for a new street lighting maintenance contract. Meantime it extended the existing contract for a period of three months and later for a further month with the result that its expiry date came to be 31 July 1997. The tender documentation issued by Renfrewshire Council to prospective tenderers included the statement - "Tenderers MUST indicate in their tender whether or not their bid is submitted on the basis of TUPE applying".
The appellants were interested in winning the contract. On 4 July 1997 they wrote to Renfrewshire Council enquiring whether, if a tenderer submitted a statement that TUPE did not apply, the Council would make a financial adjustment to that bid and, if so, by how much. Renfrewshire Council responded by letter of 8 July in the following terms:
"As the result of a legal precedent Renfrewshire Council is not permitted to state whether or not TUPE applies to a contract until it is in possession of all the tender information. Following examination of the tenders which have been submitted a decision regarding the application of TUPE will be made. If it is decided that TUPE does apply to this contract then any tender received which does not contain a TUPE bid will be considered unacceptable.
In view of the above Renfrewshire Council will accept both a TUPE and a non-TUPE price bid from each contractor.
This bulletin forms part of the contract documents. Accordingly I would ask that you acknowledge receipt in writing".
By letter of 10 July 1997 the appellants responded as follows:
"Further to your recent enquiry and receipt of Tender Documents in respect of the above, we have pleasure in returning our offer for the works as requested.
We can confirm that we consider that TUPE applies.
We trust that this meets with your approval and should you require any further information please do not hesitate to contact this office".
That letter appears from its terms to have been a communication accompanying a tender by the appellants, that tender containing only a "TUPE price bid". In the event the appellants' tender was accepted by Renfrewshire Council. The respondents, who had also tendered, were unsuccessful.
On various dates between 12 and 22 August 1997 seven persons, including a foreman and a storeman, who had formerly been employed by the respondents took up employment with the appellants. There is an unresolved dispute as to whether all of those persons had been previously employed on the lighting maintenance contract relative to Renfrewshire, there having been some redeployment of the workforce in the months immediately prior to 31 July. The parties, it seems, agreed before the employment tribunal to defer resolution of that issue until a later stage. However, it appears from the position finally adopted before us by the appellants that it is now undisputed that at least the storeman and some others had been employed at the relevant time in the relevant undertaking.
The general character of the work carried out by the respondents under their contract with Renfrewshire Council was found by the employment tribunal to be as follows:
"The work issued to A.H.L. [the respondents] by R.C. [Renfrewshire Council] was down-loaded by computer and was divided into two categories, namely, planned maintenance and unplanned maintenance. The former was issued once monthly and received by the respondents' Foreman Mr. Robertson. He formulated a programme on a geographical basis for completion of the work and notified the Storeman, Mr. MacDougall, who issued the appropriate equipment required. Instructions were given to employees on the day the work was to be carried out. A.H.L. hired tower vehicles with buckets for use by employees who were also provided with a two-way radio. On completion of the work employees returned their worksheets to the Foreman. He passed them to the cost clerk, who in turn referred them to the administration staff, for processing to the client. Instructions in regard to unplanned maintenance were received daily and varied significantly in the quantity of work to be carried out. Five days was allowed for completion of the work failing which a penalty was imposed. Additionally A.H.L. operated a 24 hour standby from Monday to Friday of each week in respect of which faults reported had to be made safe within two hours. Replacement lamps required the approval of R.C. A.H.L. considered local knowledge to be a very important pointer in selecting electricians for employment".
The work was administered by the respondents' contract manager from an office at Bridge of Weir in Renfrewshire. He was responsible for two administration staff, two foremen, a cost clerk, eight electricians, four driver/labourers and a storeman. In the final months of the contract there was a reduction both in the planned and unplanned work being instructed by Renfrewshire Council. As earlier noticed, some employees were during that period redeployed on other contract work. Some took holidays.
The employment tribunal records that in the course of the proceedings before it, following a short adjournment, it
"was advised that the following form of words in relation to employees now working for the [appellants] had been agreed -
'The work carried out is largely the same, the methodology differs to a greater or lesser extent'".
Its findings continue:
"It was not in dispute that there was no transfer between A.H.L. to Lightways of either premises, stock or vehicles. A.H.L. retained their existing stock for use in an Inverclyde contract. The platform hire vehicles were returned to the hirer. Within a relatively short period Lightways which had its depot at Larbert [outside Renfrewshire] had acquired store premises at Paisley [in Renfrewshire] which they stocked. They also hired sufficient platform vehicles to discharge their contractual duties. In regard to employees they had two qualified electricians who began work immediately on the new contract. Lightways had anticipated that if TUPE did not apply it was likely that A.H.L. employees would be available. If TUPE did not apply it was likely they would be transferred. Accordingly in either event sufficient employees would be available to perform the duties required in terms of the newly won lighting maintenance contract".
(It seems that the appearance of "not" in the penultimate sentence is a typographical error).
The employment tribunal also found that when the appellants were interviewing former employees of the respondents they discovered that the respondents had not been complying with a term of their contract with Renfrewshire Council, namely, that each employee working on the contract should have a "G39 Certificate". That certificate related to awareness of safety matters and was issued by Scottish Power. That state of affairs was explained to the employment tribunal as having arisen due to a misunderstanding on the part of the respondents. In the event the appellants arranged for all the employees to attend a course run by Scottish Power. It lasted a few hours and resulted in the awarding of the appropriate certificates.
At the conclusion of the evidence the employment tribunal heard submissions on behalf of the present appellants and respondents. It was also referred to various authorities. The employees concerned were also represented before the employment tribunal but had nothing to add. The tribunal's reasoning and conclusions on the issues were expressed as follows:
"The first question which requires to be determined is whether or not the lighting maintenance contract was an identifiable business entity constituting an undertaking in terms of regulations. Secondly if it was an undertaking whether or not there was a relevant transfer. The lighting and maintenance contract applied to the whole of the Renfrewshire District and involved maintenance of the lighting system for a four year period. This involved employment of suitably qualified persons, availability of premises and the stocking of equipment together with the provision of tower vehicles. There was a defined management and administrative system. I am satisfied that A.H.L. was involved in an activity, carried out commercially for profit, which involved assets, employees and activities and could properly be described as an undertaking. I had no hesitation in concluding that the method of transfer fell within the broad range of methods provided for by the regulations. In determining whether there had been a transfer it is essential to look at all of the factors, including the type of undertaking, whether its tangible assets have been transferred at the time of the transfer, whether and to what extent the employees have been employed by the body taking over the function, whether any clients are transferred, the degree of similarity between the activities undertaken before the transfer and after it, the period if any for which those activities are suspended. Spijkers (supra) and Dr. Sophia Richmond Stitching & Bartel 1992 I.R.L.R. 366. The critical question is whether the undertaking retains its identity and is carried out by the transferee. There was clearly no transfer of physical assets nor was there any question of a transfer of goodwill from the [respondents] to the [appellants]. The nature of the work to be carried out was clearly the same. Indeed there was a concession on behalf of Lightways that the work was largely the same but the methodology differed to a greater or lesser extent. Employees of A.H.L. were taken on by Lightways. However neither of these factors are themselves conclusive. Although the question as to whether or not the transfer has taken place is a matter of law the answer arises from a full consideration of the relevant facts. In the present case one such fact is the declared intention of the parties. Notwithstanding the terms of their tender and letter to R.C. the reality of the situation is that Lightways was not satisfied that, as a matter of law, TUPE did apply. Put another way, Lightways to have a chance of winning the contract was prepared to tender on the basis of TUPE but having secured the contract did not consider it was legally obliged to give effect to TUPE.
Although there are factors in the present case pointing for and against a relevant transfer I am influenced by the fact that Lightways tendered and won the lighting maintenance contract on the basis that TUPE applied. Moreover it was also anticipated that, if TUPE applied, employees of A.H.L. would be transferred and, [if] TUPE did not apply, the employees would be available for employment on the contract. I have in mind that Council Directive 77/187 and TUPE have as a central aim the protection of a workers' (sic) rights. Taking a purposeful (sic) approach I am of the opinion that a relevant transfer did take place...".
The tribunal had earlier indicated that an issue relative to expenses, which had also been raised, was best dealt with at the conclusion of the case.
The appellants appealed to the Employment Appeal Tribunal (Lord Johnston presiding). The main thrust of the appellants' argument there was that, having regard to the relevant criteria as identified in various authorities including Spijkers v. Gebroeders Benedik Abattor C.V. [1986] ECR 1119 and Süzen v. Zehnacker etc. [1997] I.R.L.R. 255, a relevant transfer had not, on a proper analysis of the employment tribunal's decision, occurred. The submission, as recorded by the Employment Appeal Tribunal, included the following propositions:
"The fact that the appellants had changed their position with regard to the application of TUPE in relation to the successful contract was nothing to the point. The Tribunal had accordingly been influenced by immaterial factors and had not based their decision on sufficiently material factors to justify their conclusion".
The respondents' submission to the Employment Appeal Tribunal, broadly stated, was that the issue was essentially one of fact to be determined by the tribunal of first instance and that, properly understood, that decision revealed sufficient facts upon which the decision could competently be based.
The Employment Appeal Tribunal, having revisited the relevant law and identified the relevant tests, continued:
"...thereafter, the issue has to be determined as a question of fact in each case upon the facts found by the Employment Tribunal, and as we have indicated in this context, what we, therefore, have to be satisfied is that the Tribunal has relied upon sufficient findings in fact to justify the view that the transfer of the employment of the various workers from the respondents to the appellants, meets the test we have set out, beyond merely the loss of a customer. In our opinion in this case, the crucial findings, quite apart from the question of a device with regard to TUPE, are that the employer immediately interviewed employees of the losing contractor and took some on, indicating that they required that particular personnel to carry out their new contract. This is fortified by the incidental fact that they got them certificated, in order to meet the Local Authority's requirements.
In these circumstances and in our opinion, the Tribunal has found sufficient factual criteria to meet the test we have set out, and given that we will only interfere at this level on the narrow basis that we have set out above, in the cases quoted, we have no grounds for so doing in this particular case. The decision of the Employment Tribunal will therefore stand".
In this court no criticism was made by the appellants of the general approach adopted by the employment tribunal towards the issue before it. In particular, Mr. Grant-Hutchison on their behalf expressly acknowledged that its reasoning earlier quoted was, down to and including the identification of the critical question, unobjectionable. Where it had gone wrong, he submitted, was in its treatment of certain of the factors which it had then taken into account in reaching its conclusion - the principal, though not the only, criticism being that the employment tribunal had taken into account and been influenced by the fact that the appellants had tendered and won the lighting maintenance contract on the basis that TUPE applied. One of the criticisms directed by Mr. Grant-Hutchison against the Employment Appeal Tribunal related to its approach to that fact. There was, he said, perhaps a suggestion in its reasoning ("quite apart from the question of the device with regard to TUPE") that there was a difficulty in bringing that fact into account. But, he submitted, the Employment Appeal Tribunal had been wrong in failing to recognise that the employment tribunal had erred in law in taking that fact into account at all. It was, according to his submission, a wholly irrelevant circumstance.
Before addressing these criticisms it is convenient first to consider certain other matters. In opening Mr. Grant-Hutchison criticised the statement by the Employment Tribunal - "Employees of A.H.L. were taken on by Lightways". The question of which employees taken on by the appellants had been employed in the relevant part of the respondents' undertaking having by agreement been deferred for later consideration, it was impossible, he argued, to tell whether in the quoted findings the employment tribunal had been assuming that all those taken on had been so formerly employed. Mr. Grant-Hutchison initially suggested that this aspect would require to be remitted to the employment tribunal for further consideration, including the leading of additional evidence. He later departed from that position, submitting that the remit to it should be restricted to its reconsideration under certain legal directions of the facts already found by it. In these circumstances this court, it seems, may proceed on a concession that the appellants took on several persons formerly employed by the respondents in the relevant part of their undertaking, albeit the exact number and the identity of those employees has not been established.
Mr. Grant-Hutchison also submitted that the employment tribunal erred in law in failing to take into account its finding that the respondents' employees did not possess G39 Certificates. There is, it is true, no reference to that circumstance in the employment tribunal's reasoning but it by no means follows that it did not have regard to it and accord it such weight as it thought fit. The submission to the tribunal appears to have been that the non-possession of G39 Certificates was relevant because "employees could not perform the job until duly certified". However it seems clear that employees of the respondents actually performed the relevant lighting maintenance work notwithstanding that the absence of certificates may have caused their employer to be in breach of its contractual obligations to Renfrewshire Council. The absence of certificates appears to me to have little to do with whether there was a recognisable undertaking which retained its identity after the contract was re-let. I am not surprised that the employment tribunal found it unnecessary to make any express reference to that matter. In my view, no error of law is in this respect disclosed.
The main thrust of Mr. Grant-Hutchison's criticism of the employment tribunal's decision was directed to the latter part of its reasoning. His principal submission was that the appellants' intention in respect of the application of TUPE as disclosed in their tender to Renfrewshire Council was wholly irrelevant to the question whether or not there had been a relevant transfer, that the employment tribunal had regarded this as decisive and that its decision was thereby vitiated. A declaration of intention that TUPE would apply, he submitted, was as irrelevant as a declaration that it would not. Whether there had been a relevant transfer depended on the objective facts characterising the transaction in question. Reference was made to Spijkers v. Gebroeders, especially at para. 13 of the judgment of the European Court of Justice. Mr. Grant-Hutchison in the same context also criticised the reliance placed by the employment tribunal on the appellants' anticipation relative to the employees in the alternative situations of TUPE applying or not applying.
I am unable to accept Mr. Grant-Hutchison's submission as presented. In approaching the question whether or not a relevant transfer has taken place it is, in my view, legitimate to have regard not only to the events directly constituting the transaction but also to the surrounding circumstances. Those circumstances may include the attitudes adopted by a party in anticipation of the transaction. In E.C.M. (Vehicle Delivery Service) Ltd. v. Cox [1999] IRLR 559 the Court of Appeal held that the employment tribunal was entitled to have regard, as a relevant circumstance, to the reason why the alleged transferee had not taken on certain employees of the alleged transferor, that reason being an attempt to avoid the application of the 1981 Regulations. I agree with that approach. If the evidence discloses that a transaction has been deliberately structured with a view to avoiding the regulations applying, a tribunal is entitled to scrutinise with particular care whether that attempt has or has not been successful. A declared intention that TUPE will apply, made prior to the transaction by the alleged transferee, may make even easier an inference of transfer.
Quite apart from any anti-avoidance strategies, the anticipations of the alleged transferee may shed light on the true nature of the transaction. If, as here, the evidence discloses that it was anticipated that persons previously employed in the relevant lighting maintenance work would be available, either transferred under TUPE or employed under fresh contracts of employment, to carry on the same class of work, that is a strong indicator, in my view, of identity of the undertaking. That aspect of the employment tribunal's reasoning is not open to valid criticism.
The most difficult aspect of this appeal concerns what use was made by the employment tribunal in the circumstances of the case of the fact that appellants had tendered and won the lighting maintenance contract on the basis that TUPE applied. The tribunal does not in its reasoning explain in what particular way that fact influenced its decision. If on a fair reading the relative passage is to be construed to the effect that the tribunal held the appellants to be barred by their earlier conduct from maintaining that TUPE did not apply, then that would be an erroneous approach which might well vitiate its decision. In that regard it is right to notice that the submission made to it by the present respondents was that the appellants "should not be allowed to approbate and reprobate". However, whatever exactly that submission may mean, on a fair reading the tribunal's decision does not, in my view, point to a conclusion that, by reason of their declared position at the time of tendering, the appellants were disabled from subsequently contending that TUPE did not apply. If the tribunal had regarded the respondents as so disabled, it would have been unnecessary for it to consider the facts characterising the transaction - as it plainly did. The sentence complained of is, in my view, on a fair reading to be construed as meaning that, the respondents having adopted an earlier inconsistent position and having proceeded with the transaction on that basis, the tribunal would, where the factors pointed for and against a relevant transfer, less readily be persuaded of the contention now advanced. I am not persuaded that the employment tribunal was bound to disregard that inconsistency. Put another way, if a tenderer makes a serious statement to the effect that the character of the undertaking it proposes, if awarded the contract, to carry on will be identical with that currently being carried on by the present contractor but after being awarded the contract asserts that it is not identical, the tribunal concerned to adjudicate on that assertion (being an assertion of mixed fact and law) is entitled to consider with particular care whether the primary facts warrant that inference. Although the employment tribunal's reasoning is not in this respect very happily expressed, it does not in my view disclose an error of law.
The circumstances in which an appellate tribunal or court is entitled to interfere with the decision of an employment tribunal are limited. In Melon v. Hector Powe Ltd. 1981 S.C. (H.L.) 1 Lord Fraser of Tullybelton stated at page 6:
"The appellate tribunals are therefore only entitled to interfere with the decision of the industrial tribunal if the appellants can succeed in showing, as they seek to do, that it has either misdirected itself in law or reached a decision which no reasonable tribunal, directing itself properly on the law, could have reached (or that it has gone fundamentally wrong in certain other respects...)".
See also McGregor v. Intercity East Coast Ltd. 1998 S.C. 440. In Dines v. Initial Healthcare Services Ltd. [1995] I.C.R. 11 Neill L.J. at page 23 said:
"I am well aware of the danger of subjecting the decision of an industrial tribunal to over meticulous analysis. I also appreciate that the decision and in particular paragraph 10 must be read as a whole".
His conclusion in that case that the industrial tribunal's decision should be interfered with proceeded on the basis that its reasoning disclosed a misdirection of fundamental importance, involving as it did a general proposition not in accord with the approach of the Court of Justice.
The only ground urged in the present case for interference with the determination of the employment tribunal is misdirection in law. In my view for the reasons given above that ground is not made out. The Employment Appeal Tribunal having dismissed the original appeal, albeit on slightly different grounds, it is unnecessary to discuss its reasoning. The present appeal should, in my view, be refused.
SECOND DIVISION, INNER HOUSE, COURT OF SESSION
|
Lord Justice Clerk Lord Hamilton Lord Morison |
0/161/16B/98 OPINION OF LORD MORISON in APPEAL under section 37 of the Employment Tribunals Act 1996 (formerly styled the Industrial Tribunals Act 1996) by LIGHTWAYS (CONTRACTORS) LIMITED Appellants; against ASSOCIATED HOLDINGS LIMITED Respondents: _______ |
Act: Grant Hutchison; Biggart Baillie (Appellants)
Alt: Truscott, Q.C.; Macroberts (Respondents)
21 January 2000
In my view the only substantial point arising in this appeal relates to the Tribunal Chairman's statement that he was "influenced by the fact that Lightways tendered and won the ... contract on the basis that T.U.P.E. applied". I agree that parties' intentions as expressed in a contract preceding a transfer might be relevant in a number of ways to consideration whether a relevant transfer took place, particularly in helping to explain what in fact occurred. I agree also that a declared intention by a party that T.U.P.E. would apply would render suspect any evidence led by that party to a contrary effect. However the "purposeful" (sic.) approach taken by the Chairman seems to me to indicate that he took into account that the appellants won the contract on the basis that T.U.P.E. applied as direct evidence that there was a relevant transfer; and that he did so because the application of T.U.P.E. would result in the protection of workers' rights. In effect, he was merely seeking to give weight, as evidence of a transfer, to the provisions of the contract, no doubt for laudable reasons. If that reading of the decision is correct the court would be bound to interfere with it since in reaching it the Tribunal would have been taking into account, as material evidence of a relevant transfer, a fact which they should not have taken into account in that connection.
I do not consider that the Tribunal held that the appellants were barred from maintaining that there was no transfer, in spite of the fact that this seems to have been the only contention made on the matter by the respondents. Nor do I demur to the suggestion that the contractual provision might make it easier to allow an inference to be drawn in favour of the respondent if there were direct evidence which allowed an inference to be drawn either way. This suggestion, and the decision of the Court of Appeal in E.C.M. (Vehicle Delivery Service) Ltd. v Cox [1999] IRLR 559, were not the subject of any submission made to us and it does not seem to me to have much to do with a purposive approach based on the aims of the Directive and T.U.P.E. However, since both of your Lordships apparently consider that the Tribunal's reasoning can be read in this way, I do not dissent from the course which your Lordship proposes.