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Scottish Coal Company Re Order And Judgment Of The Employment Appeal Tribunal [2005] ScotCS CSIH_68 (08 September 2005)

EXTRA DIVISION, INNER HOUSE, COURT OF SESSION

Lord Penrose

Lord Emslie

Lord Kirkwood

[2005CSIH68]

XA109/04

OPINION OF THE COURT

delivered by LORD PENROSE

APPEAL TO THE COURT OF SESSION

under

Section 37(1) of the Employment Tribunals Act 1996

THE SCOTTISH COAL COMPANY LIMITED

Appellant;

against

An Order and Judgment of the EMPLOYMENT APPEAL TRIBUNAL dated 26 May 2004, issued to the appellants on 28 June 2004

_______

Act: Truscott, Q.C.; Harper MacLeod (Appellant)

Alt: Napier, Q.C.; Bishops (Respondents)

8 September 2005

[1] The Appellants, The Scottish Coal Company Limited (Scottish Coal), appealed to the Employment Appeal Tribunal against a decision of the Employment Tribunal that the Transfer of Undertakings (Protection of Employment) Regulations 1981 applied to a transaction entered into between them and Crouch Mining Limited (Crouch) relating to the carrying on of mining activities at the Chalmerston/Pennyvenie open cast mining site in Ayrshire. The respondents before the Tribunal were employees of Crouch prior to the transaction and, with one exception, were employees of Scottish Coal thereafter. Crouch did not appear. The Employment Appeal Tribunal dismissed the appeal, and remitted the case to the Employment Tribunal for further procedure on the basis that there was a relevant TUPE transfer of Crouch's undertaking to Scottish Coal. Against that decision, Scottish Coal have appealed to the court.

[2] It appears from the extended reasons of the Employment Tribunal that, while there was a great deal of evidence about the technical aspects of the operations of Scottish Coal and Crouch respectively, it was represented to the Tribunal that the basic facts were not in contention. At that stage there was a live issue whether Crouch's activities on the site constituted an 'undertaking' in the sense of a stable economic entity. That remained an issue before the Employment Appeal Tribunal. In summarising the submissions on behalf of Scottish Coal, the chairman notes that it was an issue whether there was, on a proper understanding, an identifiable economic entity to be discovered in the activities of Crouch prior to the relevant transaction. Even if there was, there was a dispute whether there had been an effective transfer in terms of the regulations. In the appeal to the court, it was accepted by Scottish Coal that there had been a relevant undertaking prior to the transaction. The appeal was based, generally, on the proposition that in the case of an "asset-intensive" activity, which Crouch's operation was said to be, there could not be a TUPE transfer unless there was a transfer of the operational assets, or a substantial and material part of those assets, of the predecessor undertaking to the successor undertaking.

[3] In dealing with an appeal of this kind, it is necessary to examine the Employment Tribunal's findings in fact in some detail, not least to see whether they provide the material required for determination of the substantial issues argued before the court. The apparent agreement on the basic facts relevant to the issues as understood at first instance may have masked some issues on which it would have been of assistance to have had more particular findings in fact.

[4] The Employment Tribunal set out their understanding of the general position in the industry. Actual ownership of coal deposits in the United Kingdom was vested in the Coal Authority. The operational activities of the former National Coal Board passed, first, into the hands of British Coal, a publicly owned body that succeeded the National Coal Board, and then to private operators, including Scottish Coal. There was a contract between the Coal Authority and Scottish Coal. There are no findings about the scope of the contract, nor are there formal findings about Scottish Coal's rights and obligations under it. But it appears that there was evidence to satisfy the Employment Tribunal that it was for Scottish Coal to obtain consents required for the extraction of coal, to assess the economics of the extraction process, covering the removal of over-burden, the quantities of coal to be extracted, and the extent and cost of environmental protection works and other necessary accommodation works required. It was for Scottish Coal to consider the provision of internal haul roads, power lines, temporary buildings and other facilities. All necessary surveying had to be provided by Scottish Coal.

[5] Given the emphasis in the appeal before the court on whether Crouch's activities were "asset-intensive", it might have been of interest to understand the nature of Scottish Coal's contractual relationship with the Coal Authority and, if different, the owner of the land in which the coal deposits lay. It might have assisted in the understanding of the relationship between Scottish Coal and Crouch prior to the transaction. So far as disclosed to the court, the parties entered into a contract dated 15 and 17 August 2001, to operate from 16 August 2001, that was designed to compromise matters following the relevant transaction, excepting the employment issues that underlie the current dispute. But there was no disclosure of any contract regulating those parties' relationship prior to the relevant transaction.

[6] The Employment Tribunal found that, from 1988 onwards, the extraction of coal was carried out in a series of stages in designated sub-divisions of the Chalmerston/Pennyvenie site. It found:

"The actual extraction was not carried out by Scottish Coal, but was sub-contracted to Crouch, in terms of a series of contracts, generally based on similar contracts entered into with the predecessors of Scottish Coal."

The characteristics of the extraction contracts were not discussed before us, though there were forms of contract before the Employment Tribunal. If properly described as sub-contracts, one would infer that Scottish Coal had no interest in the land, or in the coal deposits, but acted as a contractor to the Coal Authority on an undisclosed basis, with power to sub-contract extraction operations to third parties such as Crouch. In the circumstances, in considering the characterisation of Crouch's operations, it may safely be assumed that Crouch had no interest in, nor any independent licence to occupy, the site or any part of it.

[7] In terms of the Employment Tribunal's findings, Crouch's task was:

"... to supply units of energy from the Chalmerston/Pennyvenie site to transport points (road vehicle or train) for onward transmissions to the customers of Scottish Coal."

If that is accurate, it would follow that whatever rights Scottish Coal derived from the Coal Authority extended to the commercial disposal of the coal extracted from the site. But Crouch's activities were confined to the physical operations of removing over-burden, extracting the minerals in quantities sufficient to meet some obligation to service Scottish Coal's depots, and transporting the appropriate 'units of energy' (a unit comprising quantities of coal and calorific value which was used as a measurement of Crouch's remuneration) to designated places. Other findings indicate that there was an obligation to effect surface restoration following completion of the extraction process. Crouch's operations were found to be substantial. About half a million tonnes of coal were extracted from the site per annum.

[8] The operations of removing overburden, extracting the coal, and replacing the overburden progressively were described as follows:

"The operations require the use of extremely heavy and expensive plant. This was provided by Crouch and took the form of large excavating plant, each unit servicing around four or five large dumper trucks. These trucks were not the usual highway capable dumper truck, but are five times as large... In total there were four excavators, and 15 dumper trucks, together also with ancillary equipment."

[9] It was held that the value of the plant was in excess of £2million. In addition to plant, Crouch had erected on the site a workshop and office buildings, with a canteen and a shower area for the use of the employees. The tribunal referred to evidence that the value of the buildings was around £150,000. The Employment Tribunal found:

"The difficulty is that the buildings would be unlikely to have much in the way of resale value, but they would be of value to Scottish Coal in their continued operations on the site, we being satisfied that the use of the buildings continued. In the absence of any expert valuation evidence, it is difficult to be precise; all that we can say is that the value is of significance."

[10] In the context of a dispute as to the characterisation of Crouch's enterprise, and in particular of a contention that what was involved was transfer of an "asset-intensive" enterprise, these findings lack relevant detail. It is difficult to identify any sense in which the buildings were Crouch's property. Superficially they were erected on land in which Crouch had no interest, proprietorial or otherwise, and became the property of the landowner. They did not obviously have a realisable value in Crouch's hands. It may be material that they are not mentioned in the agreement dated 15 and 17 August 2001. It was agreed between parties before the Employment Tribunal that Scottish Coal paid to Crouch the sum of £27,000 for various fixtures and fittings left on site when Crouch departed. Moreover, as regards the plant and equipment there are no findings as to the basis on which it was held and used by Crouch. The part played by plant and equipment in characterising an economic entity may differ depending on whether it is owned, hired, for a greater or lesser period, or made available on licence by a third party. Another variable would relate to whether the plant and equipment was exclusively dedicated to the site, or part of Crouch's general pool of plant and equipment for deployment as need arose. In a case such as this, the relative importance of the plant and equipment to Crouch's local undertaking cannot sensibly be considered without reference to such factors.

[11] In the grounds of appeal to the court, Scottish Coal characterise the transaction as one in which "no material part of the plant and equipment and the management and technical staff required to carry out, manage and plan an open cast coal mining operation transferred...". The comment is readily understood in relation to plant and equipment. But it is not readily intelligible on the facts found by the Employment Tribunal about manpower. The tribunal find:

"The applicants constitute the majority of the workforce employed in the extraction of coal at an open cast mine known as Chalmerston/Pennyvenie in

Ayrshire... "

As part of the background to the arrangements ultimately put into effect on 14 April 2001, the Tribunal narrate that Crouch were advised, in about August 2000, that they would not be required to operate the site much beyond the end of the year. They say:

"At that time, the Crouch workforce was advised of the possibility of redundancies."

[12] On advice Crouch advised 'their workforce' that TUPE would apply. There are further references to the Crouch workforce and the terms and conditions of their employment at 31 March 2001. The Tribunal then found as fact:

"On Monday 23 April, all the workforce (with the exception of Mr McCormick) reported for work. Each individual returned to find that he was working the same shift pattern as previously, and was instructed to do the same job as part of the same team. The only personnel change was the replacement of the general foreman by a Scottish Coal employee. Each employee worked with identical plant to that which was previously operated. No retraining was necessary, other than a short induction into Scottish Coal procedures. The workforce then proceeded to extract coal from area i, from which the overburden had been already removed, and coal extraction continued, on the same pattern as before..."

The Tribunal held further:

"The applicants formed part of a team (or "unit", as one witness claimed). They had a defined management structure, but were clearly locally autonomous from both (Crouch and Scottish Coal). Even apart from the issue of the earth moving plant, there were significant tangible assets, which did not transfer with them."

[13] It will be necessary to return to other material findings. But at this stage, it is apparent that there are insufficient findings relating to the structure of Crouch's establishment at the site prior to the transaction, if it is correct that not only the plant and equipment, but also the management and technical staff required to carry out, manage and plan an opencast coal mining operation, were not transferred to Scottish Coal. From the description of the tasks taken up when work began on site after the break, it appears that the 'workforce' described by the Employment Tribunal comprised the plant operators and other site workers, except the general foreman, but did not include any of Crouch's managerial staff. The Tribunal's description of this workforce as 'locally autonomous' is difficult to reconcile with the notion of a defined management structure. But, however that might have been resolved, one is left without guidance on the numbers of managerial and technical staff involved, and on their qualifications and duties. There are no findings that Crouch managerial or technical staff transferred to Scottish Coal.

[14] The Employment Appeal Tribunal summarised the facts rather more briefly than we have done, and then proceeded to set out the decision of the Employment Tribunal:

"Each of the representatives then addressed us on the evidence, and made helpful submissions. All of the representatives were clearly familiar with the well-trodden path through the TUPE minefield, and skilfully tried to steer us away from what each considered to be the dangerous areas. Mr Murphy based his submission on Chapter Five of MacMullen on Business Transfers, which is an authoritative and exhaustive analysis of the 'definition of a transfer and when a transfer occurs.' Mrs Sutherland supported the conclusions drawn from this analysis by Mr Murphy, but felt that the questions for the Tribunal to determine could be narrowed down to a much shorter list of four individual issues, as follows:-

1. Was the first respondents' undertaking at Chalmerston/Pennyvenie a

stable economic entity?

2. Was the first respondents' undertaking there confined to a specific

works contract?

3. Was there a change in the identity of the employer of that undertaking

on or about 13/14 April 2001?

4. Did the transferred undertaking retain its identity after 13/14 April

2001?

It is a feature of TUPE that every few years, in an effort to be helpful, the European Court of Justice, or the United Kingdom courts, set out a list of what they consider to be the relevant factors in question regarding TUPE transfers. Succeeding Spijkers, from the European Court of Justice, we now have Cheesman from the Employment Appeal Tribunal, and Miss McManus took us through this case for the basis of her analysis of the facts and law.

Having considered the various submissions, we preferred to follow the guidance of Cheesman which seemed to us to more fully address the issues (and also for the very good reason that it is binding authority). We looked at each of the points for consideration listed in that case, insofar as they were relevant to our present deliberations.

On the first issue of whether there was an undertaking, EAT observed that:-

there needs to be a stable economic entity whose activity is not limited to performing one specific works contract - an organised grouping of persons and of assets enabling (or facilitating) the exercise of an economic activity which pursues a specific objective. It has been held that 'one specific works contract' is restricted to a contract for building works.

This was one of the primary issues. We came to the conclusion that whilst it was true that immediately before the transfer, the workforce were largely engaged on one specific contract, they were not exclusively engaged on that, and, in any event, it was not open to us to simply ignore any previous activity ongoing continuously since 1988, as if this latest contract was something entirely separate. It clearly was not. It was merely part of the ongoing mining process, which for some reason had been separately defined. After the alleged transfer, the remaining part of the mining process was resumed.

We have to say that we do not understand the rationale behind the expressed view of the employment Appeal Tribunal that the authority of the case of Rygaard is to be restricted to a contract for 'building' works. It is difficult to see the distinction between excavating the top cover of soil for purposes of erecting a building and carrying out a similar process for the purpose of extracting coal. We would have been inclined to regard ourselves as bound by the European Court in that case had the facts been that the applicants had been engaged on a 'specific works contract' for the removal of the overburden, without any previous history on the site, and if there had been no intention immediately thereafter to proceed to extraction. If these had been the circumstances, we would have been inclined to accept the views of Ms McManus.

in order to be such an undertaking it must be sufficiently structured and autonomous, but it will not necessarily have significant tangible or intangible assets.

The applicants formed part of a team (or 'unit', as one witness claimed). They had a defined management structure, but were clearly locally autonomous from both the first and second respondents. Even apart from the issue of the earth moving plant, there were significant tangible assets, which did not transfer with them.

an organised grouping of wage-earners who are specifically and permanently assigned to a common task may, in the absence of other factors or production, amount to an economic entity.

We regarded the common task as the mining aspect of the whole site, to which for is (sic) all intents and purposes the workforce was specifically and permanently assigned from 1988 until 14 April 2001. The contractual basis of the arrangements for the extraction between the first and second respondents did not affect that reality, in our view. We appreciate that at various points in time, the contract went out to tender, but the result seems to have been accepted as a foregone conclusion. Presumably the reason for this is that the setting up costs for a new contractor would be so great as to make it not a viable proposition. The facts point to a position that so long as the second respondents wished to extract coal, and the first respondents were acceptable as contractors, then the relationship, and the operations, would continue.

an activity of itself is not an entity; the identity of an entity emerges from other factors such as its workforce, management staff, the way in which its work is organised, its operating methods and, where appropriate, the operational resources available to it.

The fact that the second respondents wished to take on the same workforce is of significance here. The local knowledge, the familiarity with each other, and with the equipment, the continuity of operating method including 'the box cutting', shift pattern, etc, all point to the existence of a stable economic entity since 1988.

As to whether there has been a transfer, EAT stated that regard must be had to the following:

the decisive criterion for establishing the existence of a transfer is whether the entity in question retains its identity, as indicated, amongst other things, by the fact that its operation is actually continued or resumed.

There was no evidence that there was any intention on the part of the second respondents to cease operations at the site. The interruption was only momentary, and would have been a holiday period in any event for most of those employed. There was only one change in the workforce; the replacement of the foreman. Weighed against the fact that apart from administrative matters, no other changes were effected, this is in our view insignificant. Our finding is that the entity retained its identity.

in a labour-intensive sector it is to be recognised that an entity is capable of maintaining its identity after it has been transferred where the new employer does not merely pursue the activity in question but also takes over a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessors to that task. That follows from the fact that in certain labour-intensive sectors a group of workers engaged in the joint activity on a permanent basis may constitute an economic entity.

There was no argument that the vast majority (all but one) of the workforce ceased working for the first respondents, and were instructed thereafter to attend for duty one week later. From the surrounding facts and circumstances, the workforce clearly felt that they were obliged to do so. Again, this is an indication to us that the economic entity retained its identity.

it is necessary to consider all the factors characterising the transaction in question - but each is a single factor and none is to be considered in isolation. However, whilst there is no legal authority on the point, it is presumably not an error of law to consider 'the decisive criterion' in isolation because that is an aspect of its being 'decisive', although when considering 'the decisive criterion' it is necessary to have regard to the fact that it is not itself dependent on a single factor.

We did not regard any one single factor as being decisive in this case. The matter was complicated, and it was necessary for us to take an overall view of a large number of factors. There was no 'smoking gun'.

matters that require consideration include the type of undertaking, whether or not its tangible assets are transferred, the value of its intangible assets at the time of transfer, whether or not the majority of its employees are taken over by the new company, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer, and the period, if any, in which they are suspended.

We did consider all of these matters. We disagreed with Mrs Sutherland that assets transferred included any rights in respect of the coal itself. In our view, all that the first respondents had in this respect was a contractual obligation to work 'the coal, and a right to be paid for that work in terms of their ongoing contract. It was clear that no contractual obligations were transferred. There could not be any 'goodwill' in the circumstances we have described. The only intangible asset that was transferred was the value of the coherent and experienced workforce. It also seemed to us that customers were not relevant to our consideration. The obligation of the first respondents were simply to deliver coal to a rail head from whence it was delivered to customers by the first respondents. If there was any customer relationship, then the first respondents were the 'customers' of the second respondents.

account also has to be taken, amongst other things, of the type of undertaking or business in issue, and the degree of importance to be attached to the several criteria will necessarily vary according to the activity carried on.

We did attach importance, as did the respondents, to the continuity of the workforce. Mining is a dangerous activity, and safety is a major consideration. All other things being equal, it appeared to us that a site experienced workforce will be safer and more efficient than a workforce which is not familiar with the site. These must be the primary reasons why the second respondents wished to retain the existing workforce.

the mere fact that the service provided by the old and new undertaking providing a contracted-out service or the old and new contract-holder are similar does not justify the conclusion that there has been a transfer of an economic entity between predecessor and successor.

This factor alone does not justify the conclusion, but it is a factor which we can take into account.

the absence of any contractual link between transferor and transferee may be evidence that there has been no relevant transfer but it is not conclusive as there is no need for any such direct contractual relationship.

We agreed that there was no contractual link in terms of continuing obligations after 14 April. The fact that the discharge of the earlier contracts was still to be completed is probably irrelevant in this context. There is, however, abundant authority for the view that any incoming contractor needs no direct contract with the outgoing contractor for the transfer regulations to apply.

when no employees are transferred, the reasons why can be relevant to determine whether or not there was a transfer.

Our finding is that the employees did transfer.

the fact that the work is performed continuously with no interruption or change in the manner or performance is a normal feature of transfers of undertakings but no particular importance should be attached to a gap between the end of the work by one sub-contractor and the start by the successor.

If there was any gap in the operations at all, it was of no significance.

Since the case of Lightways, it is open to the Tribunal to consider as a factor the attitudes adopted by the parties in anticipation of the transaction. In the present proceedings, we heard a deal of evidence about the positions adopted by the first and second respondents at various points in advance of, and immediately after the transfer.

We took the view that such evidence as was produced was not clear cut as to, in particular, the position of the second respondents. The difficulty for the Tribunal, was that the second respondents are an incorporated body, and different officers and agents, with different responsibilities, have apparently said different things at different times. Where no settled and concluded view is apparent, we took the view that it would be wrong for us to assume that such a settled and concluded view existed, and draw any inference from it.

In any event, it was not necessary for us to do so. There was a sufficiency of other evidence, in our view, to hold that the answers to each of Mrs Sutherland's questions pointed to the existence of a transfer, and having considered all those matters which we have narrated, we find

accordingly.

At the close of the submissions, Mr Murphy asked to address the hearing on the issue of expenses. These cases will now proceed to a hearing on the merits, which, as we have earlier indicated will be before another Tribunal. We think it would be appropriate to defer consideration of expenses until after all these proceedings are complete, since it is possible that any findings by us in relation to expenses at this stage could complicate matters further down the line. For the avoidance of doubt, however, if such a motion is made at the end of the day, it will be considered by this Tribunal, insofar as it relates to the proceedings before us."

Having rehearsed the arguments of parties, and listed the more important of the authorities referred to by the parties, the Employment Appeal Tribunal held:

"8. We approach this matter upon the basis that it is important to keep in mind the main purpose of the Regulations, namely, the protection of employment rights in transfer situations. We use that phrase diffidently but mainly to identify the position. It is not appropriate, in our opinion, to compare a single works contract such as a construction of a house which is completed when the house is completed, and the ongoing arrangements which existed over the relevant period in the present case, involving precisely the same activity, namely, the extraction of coal involving the appellants and Crouch. It is wholly artificial to regard each contract as a separate works contract. What was ongoing was the removal of coal which continued after the transfer. We recognise that the activity was asset-reliant but we consider that, observing the position upon the evidence before the take-over or cessation, there was sufficient to identify within Crouch's activities a stable economic entity which was asset-reliant, i.e., heavy plant provided and buildings custom built for the purpose.

9. We recognise that in Oy Liikenne, the fact that the buses were not transferred was regarded as conclusive by the ECJ in relation to whether or not there had been a transfer when the contract ceased, but we do not consider that that case properly can be compared with the circumstances of the present one. Here, the men were, on the evidence, highly skilled, and were carrying on the same activity before as afterwards. It is plain that the appellants wanted the workforce to continue, and, indeed, sought to acquire the heavy equipment but were unsuccessful in persuading Crouch to sell it to them. To our mind, if they had achieved the obtaining of that equipment, there could be no doubt a relevant transfer within the meaning of the Regulations had been effected.

10. At the end of day, the sole question for us seems to be, against the background of our view that an identifiable, stable economic entity existed before the transfer in respect of the activities of Crouch, whether such as was transferred was sufficient to effect a TUPE transfer. That question always seems to us to be a matter of degree. The various authorities at each end of the spectrum, posing an extreme situation, are identified by Abler supra. While the Tribunal may have attached too much emphasis on one view to the decision in Cheesman, we do not think their approach should be vitiated simply because that was a labour-intensive case. The questions posed by the Tribunal seem to us to be relevant and admit an answer they were entitled to achieve upon the evidence. An examination of what was going on after the transfer reveals identical activity, the only difference being that the equipment now belonging to the appellants was being used instead of that being formerly operated by Crouch. Applying the purposive approach, as we feel obliged to do, we, therefore, conclude that the Tribunal were entitled to reach the decision that a relevant transfer had taken place, thus effecting protection of workers' rights and achieving the purpose behind the Regulations. We consider that, if the proper approach has to be whether or not assets were transferred, sufficient assets were transferred to effect a relevant transfer.

11. For these reasons this appeal will be dismissed and the case remitted back to the Employment Tribunal for further procedure."

[15] For the purposes of the appeal to this court, it was accepted that Crouch's activities and establishment at the site constituted a stable economic entity immediately before the relevant transaction: there was a live undertaking, as Mr Truscott put it. The only issue was said to be whether there had been an effective transfer of the undertaking to Scottish Coal in terms of the regulations. But, in our view, that begs the question of the characteristics of the stable economic entity in question.

[16] In presenting the appeal, Mr Truscott summarised Scottish Coal's position succinctly: the Employment Tribunal and the Employment Appeal Tribunal had failed to follow the guidance provided by the European Court of Justice in two recent cases, Oy Liikenne Ab v Pekka Liskojarvi and Pentti Juntunen and Abler v Sodexho MM Catering Gesellschaft mbH. Those cases had shown that the characterisation of an undertaking as labour-intensive or, in the alternative, as asset-reliant, was determinative of the issue whether there had been a transfer of an undertaking. This had not been clear in earlier jurisprudence of the Court of Justice, and in particular in Jozef Maria Antonius Spijkers v Gebroeders Benedik Abattoir CV. It was later, in cases relating to cleaning contracts, that the distinction had developed. It was that process of development that the Tribunals had ignored, or at least had failed to give effect to. On any view, Crouch's undertaking was asset-reliant, and ought to have been categorised as such for the purposes of the regulations.

[17] Mr Truscott reminded the court that it was for the Court of Justice to interpret the Treaty and the statutes of bodies established by the Council. The Court of Justice and the national courts had to keep within their respective areas of jurisdiction, with the aim of ensuring that community law was applied in a unified manner. The opinion of the Court of Justice was binding so far as it answered questions remitted to it within its jurisdiction: it was for national courts to apply the rulings to the particular facts before them.

[18] On a fair reading of the Employment Tribunal's decision, he submitted that it was clear that the Tribunal had relied on the guidance it found in Cheesman v R Brewer Contracts Ltd. That case dealt with labour-intensive undertakings, and the guidance it provided was specific to that context. It was in that context that the Employment Tribunal approached the issues before it. It did not have regard to the important issues arising from the fact that the heavy equipment required for operations on site was not transferred to Scottish Coal. An undertaking was 'asset-reliant' if assets were required for the performance of its business activities. If that categorisation applied, the assets must be comprised in the transfer to the successor organisation if it were to be found that there had been a transfer of the undertaking for the purposes of the regulations.

[19] Mr Truscott referred to the Acquired Rights Directive as originally promulgated, the Amendment to Transfer Directive of 29 June 1998, and the Council Directive of 12 March 2001 relating to the transfer of undertakings. The progressive amendments of the original Directive reflected decisions of the Court of Justice in the intervals, and provided clarification of the scope of the Directives accordingly. Against that background he discussed a range of authorities: Spijkers; Ayse Süzen v Zehnacker Gebaudereinigung GmbH Krankenhausservice; Betts v Brintel Helicopters Ltd; G. C. Allen v Amalgamated Construction Co Ltd; Whitewater Leisure Management Ltd v Barnes; Cheesman; Oy Liikenne; and Abler. The Süzen case had reflected a change of direction from previous decisions of the Court of Justice. It had highlighted that in certain labour-intensive sectors a group of employees engaged in a joint activity on a permanent basis might constitute an economic entity capable of maintaining its identity after transfer to a new employer. In the case of cleaning contracts, the Court held that the directive did not apply where the work was simply re-let to a new contractor "if there is no concomitant transfer from one undertaking to the other of significant tangible or intangible assets or taking over by the new employer of a major part of the workforce, in terms of their numbers and skills, assigned to his predecessor to the performance of the contract". Categorisation had begun to be a significant issue. Cheesman was specifically a case relating to labour-intensive operations, developing the distinction between the two classes of undertaking. By adopting the guidance from that case uncritically in an asset-reliant case, the Employment Tribunal had misdirected itself. Classification of the undertaking, as between asset-reliant and labour intensive, should have had a higher priority if the guidance were properly to be applicable to all classes of undertaking. The factors identified in the case were peculiarly adapted to labour-intensive undertakings, and, applied uncritically in a case such as this, distorted emphasis. The Oy Liikenne case emphasised the need to classify the case, and against that classification to apply the relevant factors. Abler continued the process of refinement of the Court of Justice's approach. These two cases indicated a trend away from the general approach in the older authorities. The emergence of characterisation as a primary step was a recent development in the Court's jurisprudence. But where it was appropriate, it was necessary to apply the recent cases. This was clearly an asset-reliant undertaking. After these two cases, it was not appropriate for the Tribunals to adopt the approach of weighing all factors in the balance as the Employment Appeal Tribunal did in P & O Trans European Ltd v Initial Transport Services Ltd. That was not consistent with the approach of the Court of Justice. One must first characterise the undertaking as asset-reliant or labour-intensive. In the former case, if the assets are not transferred, the undertaking is not transferred. The court should either remit the appeal to the Employment Appeal Tribunal with an order to send it back to the Employment Tribunal for re-hearing, or formulate a question or questions for reference to the Court of Justice if there were doubt about the tests to be applied.

[20] Mr Napier for the respondents submitted that there were two issues: the existence of an economic entity, and the transfer of the entity. This appeal related to the second issue only. As a matter of general approach, he advanced four propositions: (i) Oy Liikenne did not have the drastic effect on transfer of asset intensive operations contended for; (ii) as a matter of policy, when considering the interpretation of the case law, the Oy Liikenne case should not be given the significance Mr Truscott pressed on the court; (iii) there was no basis on the facts found for a reference to the Court of Justice; and (iv) the appeal should be dismissed.

[21] The real issue, on his approach, was not whether the decision of the Employment Appeal Tribunal was correct, but whether the Employment Tribunal was correct. One had to distinguish between the identification of the principles to be applied and the application of those principles to a set of facts. In so far as the appeal turned on the application of the law to the facts, the only ground of appeal that would be open would be perversity, in the sense that the decision was one that no reasonable tribunal could have reached, and that was not pled. The Employment Appeal Tribunal had appreciated that. It was not for that Tribunal, nor for this court, to reconsider the issue whether there was a transfer in fact.

[22] He submitted that there was a sense of unreality when confronted by the criticism of the Employment Tribunal for failing to categorise the undertaking as asset-reliant. The Tribunal was never asked to follow Oy Liikenne. Its decision reflected the approach of the parties. In particular it was the appellants' solicitor who invited the Tribunal to follow the approach in Cheesman. Looking beyond that to the appeal to the Employment Appeal Tribunal, the grounds of appeal did not mention Oy Liikenne. It was only in the written submissions to the Tribunal, and during the subsequent hearing, that the issue emerged. The issue of characterisation was never argued. If the issue had been live, it would have been necessary to consider whether it was relevant that there were some assets that had been transferred. Further it was clear that Scottish Coal did want the assets and that Crouch did not want to sell. The case bristled with complexity if the transfer of assets was to be an issue: it should have been raised and dealt with at an earlier stage.

[23] He submitted that there was no good reason why the protection or non-protection of employees' rights should turn on a purely arbitrary factor. The transferee might have other assets suitable for the purpose. One should follow the guidance in Spijkers. There was no need to go beyond that and develop elaborate rules. The intention of the Directive was to safeguard the rights of workers on change of employer: Celtec Ltd v John Astley, and Fairhurst Ward Abbotts Ltd v Botes Building Ltd. In those cases, as in the present, there was an attempt to create a basis in technical legal analysis for a rule that was not compatible with the employees' rights. If the appellants were correct, it would be easy for employers to circumvent the protection afforded by the Directive. It was necessary in every such case to look behind the superficial, and to consider what was happening in the light of broad principles.

[24] The broad approach of the Court of Justice in Spijkers continued to guide the Court of Appeal: RCO Support Services Ltd v Unison; P & O Trans European Ltd; and Numast v P & O Scottish Ferries. It was clear from these cases that Mr Truscott's argument had not found favour with the courts of the United Kingdom. It should not be adopted.

[25] In any event, Oy Liikenne did not support the propositions the appellants sought to derive from it, and Abler, properly viewed, fell short of supporting the appellants. Spijkers provided a flexible approach, well adapted to the widely varying circumstances in which the Directive had to be considered, and there was no need to go further. There were sound policy reasons why one should not go further. The Employment Tribunal had followed sound guidance and the Employment Appeal Tribunal was right to arrive at the conclusion it did.

[26] It can be seen from the foregoing narrative of the arguments of parties that there are potentially important issues of law for determination in this appeal. It is, however, equally clear that the findings of the Employment Tribunal do not provide a proper basis in fact on which to consider the application of the guidance provided by the Court of Justice, and indeed by the Court of Appeal and the Employment Appeal Tribunal.

[27] The opinion of the Advocate General in Oy Liikenne repeats the decisive test for transfer of an undertaking within the meaning of the Directive. It is:

"...whether the entity in question retains its identity [after the transfer has taken place]."

And:

"The Court has furthermore pointed out that in fulfilling its role, the national court must assess the degree of importance to be given to the various elements of the transaction, having regard to all the circumstances and must take into account the type of undertaking or business transferred, having regard in particular to the sector of activity in which it operates. The national court must therefore determine which are the essential and indispensable elements required in order for the economic entity to carry on operating and establish whether these elements have been taken over by the transferee."

[28] Mr Truscott relied on the advice of the Advocate General that where an undertaking comprises significant assets which are indispensable to its operation, the absence of any transfer of those assets means that it is in principle wrong to hold that the provisions of Article 1 (1) of the Directive apply. Since the capital plant used by Crouch was not taken over by Scottish Coal, so it was argued, the test prescribed by Oy Liikenne could not be met, and the appeal must be allowed.

[29] However, the Employment Tribunal did not find in fact that the plant was indispensable to Crouch's operations. Indeed it appears that the relative significance of the plant in that context was not considered in any detail by the Tribunal at all. Nor did parties place before the Tribunal information on which it could properly have assessed the position. It is common in the civil engineering sector for capital plant required for site operations to be held on hire from plant hire providers on complex contracts that seek to regulate parties' relationships on termination of hire as well as on commencement and during the hire period. In that way the industry can operate efficiently, with the plant available for successive contracts in different parts of the United Kingdom throughout its economic life. On any one contract the plant may be an indispensable part of the contractor's current activities, in the sense that the physical work on site cannot be carried out without its use. On the other hand what may be indispensable is the availability of the plant for the time being, and it may be irrelevant whether the plant is owned by the contractor, or held on hire, or on some informal licence, however short or long term. In this case Scottish Coal were able to continue operations without a break attributable to the need to source plant with each workman able to resume operations on site using plant which appears to have been identical to that previously provided by Crouch.

[30] It does not necessarily flow from use, even intensive use, of plant by an entity that the plant employed before transfer is definitive of the identity of the entity. In Numast v P & O Scottish Ferries, it was a condition of the contract for the provision of ferry services between mainland Scotland, Orkney and Shetland that the vessels used were compliant with Safety of Life at Sea requirements. Northlink Orkney and Shetland Ferries won the contract, previously held by P&O Scottish Ferries. The new operator did not use any of the former operator's vessels. None of the vessels satisfied SOLAS requirements. The successor used its own vessels. It would not have been sensible to require the successor to take over and use vessels that would immediately have placed it in breach of contract. Put otherwise, it would have made no sense to characterise P&O's vessels as essential and indispensable elements required in order for P&O to carry on its operations when P&O itself could not have fulfilled the new contract using those vessels. It is not determinative of the issue that particular plant was used by the former operator. In identifying the predecessor entity, the fact finding tribunal must consider whether the plant meets the test of being essential and indispensable to the entity as part of its assessment.

[31] Abler demonstrates that there may be a transfer of necessary equipment where an employer makes the equipment available to successive contractors whose own contribution is primarily the provision of labour. The case demonstrates that the transfer of ownership of plant is not essential. The guidance provided by the Court of Justice does not deal explicitly with the case in which generic plant is essential for the efficient performance of the activity, but where each individual contractor may obtain the use of the plant in a variety of ways, and under a variety of forms of contract. In Numast v P & O Scottish Ferries the Employment Appeal Tribunal observed that:

"In an asset-intensive industry the fact that assets were not transferred will be a circumstance to be taken into account. But the whole of the transaction has to be looked at in order to see whether one particular factor is decisive."

[32] That, in our view, reflects the weight of the Court of Justice guidance, and in particular the passage quoted from Oy Liikenne. In assessing the degree of importance to be given to plant, and the transfer or non-transfer of it as part of the transaction, the national court must have regard to all the circumstances and must take into account the type of undertaking or business transferred, having regard in particular to the sector of activity in which it operates. That requires a close examination of the wider industry context, and the activities of the predecessor entity within that context. It is in the light of that inquiry that the national court must determine what are the essential and indispensable elements required in order for the economic entity to carry on operating and establish whether these elements have been taken over by the transferee.

[33] The complexity of the arrangements between parties in this industry sector is well illustrated in the case of Crouch Mining Ltd v Scottish Coal, with which it might have been reasonable to expect Scottish Coal to be familiar, if not the respondents. That case related to a different opencast coal mining site, the Dalquhandy site at Coalburn in Lanarkshire, and was not directly concerned with the facts of this case. But the decision eloquently demonstrates the need for a careful examination of the economic realities of the particular undertaking in the context of this industry in order to identify on the essential characteristics of the undertaking in the context of a claimed TUPE transfer. There are no findings in fact in this case that reflect an appreciation by the Employment Tribunal of the economic realities of the arrangements for provision of plant for use at the site. Indeed it would be fair to say that the relative importance of plant and labour in Crouch's operations is not analysed at all.

[34] A further deficiency relates to the transfer or non-transfer of supervisory and technical staff. It is not clear whether this issue was focused for the Employment Tribunal. In the grounds of appeal to the court it is made clear, and it was not challenged before us, that Crouch's managerial and technical staff were not employed by Scottish Coal after the transaction. There are no findings in fact that deal with this matter, or with the implications that might flow from such findings in fact as might be made.

[35] Mr Truscott moved the court to remit the case back to the Employment Appeal Tribunal with directions to remit it to the Employment Tribunal for reconsideration, or alternatively to refer a question to the Court of Justice to focus the issue that he submitted arose in this case. There can be no question of referring any question to the Court of Justice as this case stands. The factual findings are not sufficiently clear for such a purpose. Further, we are not persuaded, as this case stands, that any relevant issue arises on which further guidance from the Court of Justice is either necessary or desirable. Like the Court of Appeal in England, we doubt whether the recent decisions of the Court of Justice in Oy Liikenne and Abler represent the shift away from previous authorities for which counsel for the appellants contended. In both cases, the Court reaffirmed the guidance previously given in Spijkers and other cases to the effect that all relevant facts and circumstances must be identified, and weighed in the balance, to determine whether an undertaking has or has not been transferred. Oy Liikenne and Abler were decided on the facts found in them. We do not read either case as laying down an invariable requirement that, in the context of a claimed TUPE transfer, a given business must necessarily be characterised as either "asset-reliant" or "labour-intensive", as if those were mutually exclusive categories that defined exhaustively the range of possibilities that could arise. The range of intermediate possibilities appears, a priori, to be unlimited. The cases illustrate the position at one end of the spectrum when a transfer must include the production assets of the entity. In intermediate cases, it must always be an issue for the fact-finding tribunal whether, or an appreciation of all relevant facts and circumstances, the undertaking in question can be said to have been transferred for the purposes of the 1981 regulations.

[36] There is substance in the criticism that the Employment Tribunal applied the guidance in Cheesman v R Brewer Contracts Ltd indiscriminately, and in particular without proper regard to the need to distinguish what was obviously a labour-intensive case from a case in which the true nature of the undertaking was or ought to have been a live issue. We are far from clear that the Tribunal had the assistance that it required to deal adequately with the issues that arise on the jurisprudence of the Court of Justice as it was at the time of the original hearing. In our opinion, the factual inquiry did not focus on the issues which were argued in this appeal. It would be premature to comment further. We shall allow this appeal and remit the case to the Employment Tribunal for a hearing de novo.