United Kingdom Employment Appeal Tribunal

BAILII case number: [1994] UKEAT 189_93_1907

Appeal No. EAT/189/93

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 19 July 1994

Before

THE HONOURABLE MR JUSTICE MORISON

MISS J W COLLERSON

MRS T MARSLAND

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MR R SWINNOCK          APPELLANT

(1) GROSVENOR OF CHESTER (AUTOMOTIVES) LTD T/A GROSVENOR MAZDA (IN LIQUIDATION)

(2) SECRETARY OF STATE FOR EMPLOYMENT

(3) PENTRAETH HOLDINGS PLC          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellant APPELLANT IN PERSON

For the 3rd Respondent MR G MORRIS

(0F COUNSEL)

Messrs Wayman Hales

2 White Friars

Chester

CH1 1PS

NO ATTENDANCE BY

1ST AND 2ND

RESPONDENTS


 


MR JUSTICE MORISON: This is an appeal against the unanimous decision of an Industrial Tribunal held at Liverpool which concluded that Mr Swinnock, the Appellant whom we shall call either "the Appellant" or "the employee" or "Mr Swinnock" was fairly dismissed by Grosvenor of Chester (Automotives) Ltd t/a Grosvenor Mazda whom we shall hereafter called "the Transferor" by reason of redundancy and that his dismissal was not automatically unfair pursuant to paragraph 8(1) of The Transfer of Undertakings (Protection of Employment) Regulations 1981.

The facts may be shortly stated. The employee was responsible with a partner for the incorporation of the transferor Company in October 1986. It had a dealership agreement for the sale of Mazda cars. It sold also second-hand cars and ran a service and spare parts operation. His partner retired from the business in 1989 and the employee continued as the sole active director. In June 1990 he caused the Transferor to appoint him managing director and dealer principal on a 5 year service contract with a right to an extension for a further 5 years at an annual salary of just under £74,000. The Transferor never made a profit. It was in debt to Mazda Finance Company and on 11 October 1990, 4 months after the service contract had been entered into, the Mazda Finance Company appointed a receiver pursuant to their rights under a debenture. The receiver immediately informed the employee that his salary was being cut to £25,000. It became clear to the receiver that for a number of reasons the employee's services should be dispensed with. Accordingly on 19 October 1990 he dismissed the employee together with 8 other members of staff leaving in position a small workforce.

The reasons for the dismissal were that there was no role for the employee; the administration of the Transferor had been taken out of his hands; Mazda were refusing to supply any new cars and on the findings made by the Industrial Tribunal there were no secondhand cars to sell. There was no money to pay his salary. The employee had commenced litigation against Mazda and the receiver and his continued presence at the premises was an embarrassment.

Finally, the receiver, had shortly after he was appointed, advertised the Transferor's business for sale as a going concern and without the services of the Appellant he considered that the Transferor's business could be sold for a better price than if he had remained in employment because otherwise the business would be saddled with the expense of a managing director on a high salary.

Pentraeth Holdings PLC eventually bought the Transferor's business. We shall call them "the Transferee". According to the findings of the Industrial Tribunal, they first had a look round the Transferor's premises after the dismissal at the end of October. We were told today and accept from Mr Swinnock, that in fact it is likely that the managing director of the Transferee was well aware of the financial circumstances of the Transferor Company and the appointment of a receiver as he had been consulted specifically by Mr Swinnock in his capacity as Dealer Council chairman. It is thought by Mr Swinnock that this particular man had been in contact with Mazda about the possible transfer of a franchise to him and he also considered it likely that he had been "sniffing around" the Transferor Company before he was dismissed.

Pentraeth Holdings PLC bought the business following an offer on 16 November. After a certain amount of negotiations contracts of sale were exchanged on 28 December 1990 and completion was effected on 2 January 1991 and we were told by Mr Swinnock, and accept, that they did indeed have granted or regranted to them, as the case might be, a Mazda franchise.

The Industrial Tribunal's decision may be summarised in this way. Firstly the transfer was plainly a relevant transfer within the meaning of Regulation 3. Secondly Regulation 5 did not apply to transfer the employee's contract of service and all the rights and liabilities thereunder because the employee had disappeared from the scene almost a month before the Transferee made an offer, and at the time of the dismissal negotiations had not commenced for the sale of the business. Thirdly the reasons for his dismissal were those set out and it did not appear that any of these reasons related to the transfer itself:

"because the dismissal took place before there was any question of a transfer to the Transferee or indeed to anybody else... The principal reason for dismissing the employee was clearly that his presence, even at the reduced salary, was costing a lot of money and that there was no role for him to perform in the business as it stood... and as he was no longer entitled to manage the company, and as there was nothing to sell there was, in effect, nothing for him to do. This was the reason or principal reason for his dismissal, and it would have had to take place whether there was going to be a transfer or not, and it therefore was not caused by the transfer or a reason connected with the transfer."

Fourthly they expressed the view obiter, as it seems to us in sub-paragraph (d) of paragraph 4, that had Regulation 8(1) applied the dismissal was for an economic reason within the meaning of Regulation 8(2). Fifthly having established the reason for the dismissal the Industrial Tribunal concluded that:

"no reasonable employer could conceivably have retained the applicant in any capacity whatsoever, so that the question of finding him alternative employment did not arise. With regard to the question of consultation, it is clearly necessary in the vast majority of cases for consultation to take place before a dismissal for redundancy... The receiver in such circumstances could clearly come to the opinion that it was absolutely necessary to dismiss the employee and futile to consult with him as to any possible alternative. That being so the dismissal was reasonable within the meaning of Section 57 and was therefore fair."

Sixthly they calculated his redundancy payment and awarded it against the Secretary of State for Employment which he had, so the Tribunal record, accepted was payable by him under Section 106 of the 1978 Act.

The appeal has been argued by Mr Swinnock himself although he has been assisted with a Skeleton Argument which was prepared for him by his lawyers. We would like to express our gratitude to Mr Swinnock for the extremely courteous and fair way in which he has presented his appeal. Not surprisingly he has concentrated more on the facts than on points of law leaving us to deal with the points of law as they are raised in the Skeleton Argument.

Neither the Transferor nor the Secretary of State is represented. Each is content that we should allow the appeal which is in a sense not surprising. The Transferor is now in liquidation. If responsibility is passed to the Transferee then neither the Transferor nor the Secretary of State would have any liability for redundancy payments or for claims for damages or such like.

The first ground of appeal is that the Industrial Tribunal have substituted their own judgment for that of the receiver in concluding what was the principal reason for the dismissal. That argument is in our view unsustainable in the circumstances of this case. What is the principal reason for the dismissal is essentially a question of fact for the Industrial Tribunal. The receiver gave a number of reasons which influenced his decision and the Industrial Tribunal had the task of assessing what was the principal reason. They did so with care as it seems to us, and their conclusion cannot we think be faulted. At the most it could be said that his dismissal was in connection with a possible sale at some future and unknown date to an as yet unidentified purchaser. Even if Mr Jones and the 3rd Respondent had been "sniffing around the Company", they were only one of several potential purchasers. It could not be said, in our judgment, that the dismissal was in connection with the transfer which is what Regulation 8(1) of the Transfer of Undertakings Regulations requires.

Secondly it is said that Litster's case is not to be distinguished on the grounds that there was collusion whereas in this case there was no evidence of collusion. We agree but we do not accept the conclusion that Regulation 8(1) applied to a dismissal which is in connection with a possible transfer where the transfer is - to use a colloquial expression appropriate we think to the facts of this case as well - "only a twinkle in the eye". Because Mr Swinnock was not dismissed in connection with the transfer he was not someone who would have been employed in the relevant undertaking "immediately before the transfer" but for a dismissal in breach of Regulation 8(1). Therefore Regulation 5 does not apply so as to transfer to the transferee responsibility for what was done by the transferor to or under Mr Swinnock's contract of employment.

These cases are never easy and we are satisfied on the facts here that the Tribunal arrived at a decision which they were entitled to arrive at. As we have pointed out during the course of today on more than one occasion, our jurisdiction is limited by statute. We can only receive appeals which raise points of law and only allow them or reverse the Tribunal's decision where we are satisfied that there has been an error of law. With great respect to the Notice of Appeal and with even more respect to the arguments raised by Mr Swinnock in person we do not consider that any point of law has been demonstrated in this case.

Before leaving it we would like to add this. Receivers should not take the view that just because of the economic circumstances which puts them into that position they are entitled to behave as they see fit without regard to the interests of the employees whom they are there partly to look after after their appointment and nothing that we have said in this Judgment should be regarded as giving a receiver carte blanche simply to dismiss people as and when they wish. Having said that this is not an appeal which we feel we can allow in the circumstances of this case.