United Kingdom Employment Appeal Tribunal

BAILII case number: [1994] UKEAT 526_94_1312

Appeal No. EAT/526/94, EAT/526/94

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 13 December 1994

THE HONOURABLE MR JUSTICE MUMMERY (P)

MR L D COWAN

MR W MORRIS

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COMPASS SERVICES (UK) LTD          APPELLANTS

(1) MRS P WHITE

(2) ARAMARK PLC          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellants MR JONATHON SWIFT

(of Counsel)

Mr J Nixon

Messrs Edge Ellison

Rutland House

148 Edmund Street

Birmingham B3 2JR

For the Respondents NO ATTENDANCE BY

FIRST OR SECOND RESPONDENTS

(OBSERVERS ONLY)


 


MR JUSTICE MUMMERY (PRESIDENT): This is an appeal from the decision of the Industrial Tribunal held at Southampton on 7 March 1994. For full reasons sent to the parties and entered on the Register on 13 April 1994, the Chairman alone decided that the termination of the contract between the first Respondent, Compass Services Ltd and the Ministry of Defence and the commencement of the contract between the second Respondent, ARA Services Plc and the Ministry of Defence, did not give rise to a transfer of an undertaking within the provisions of the Transfer of Undertaking (Protection of Employment) Regulations 1981. The second Respondents, who, we are informed, have been known as ARAMARK Ltd since 14 October 1994, were therefore dismissed from these proceedings.

The proceedings in question have been brought by Mrs Patricia White and 30 other employees, claiming redundancy and unfair dismissal against Compass and claiming a declaration of continuity as against both Compass and ARAMARK.

Compass Services Ltd, the first Respondents, were dissatisfied with that decision, which was reached on a preliminary point and, accordingly, appealed by a notice of appeal dated 24 May 1994. On the hearing of the appeal, Mr Swift has represented Compass Services Ltd.

As to the other parties, letters have been received from ARAMARK Plc stating that they do not oppose the appeal and from solicitors for Mrs White and the other employees, stating that they do not intend to oppose the appeal. They simply wish to attend as observers.

The question on this appeal is, therefore, whether there was an error of law in the conclusion of the Industrial Tribunal that ARAMARK should be dismissed from the proceedings because, in the view of the Chairman, there was no transfer of an undertaking. The decision of the Tribunal Chairman was made before he had the benefit of the decision of the European Court of Justice in Schmidt v Spar-Und Leihkasse der Fruheren Amter Bordesholm, Kiel und Cronshagen [1994] IRLR 302 or the benefit of the decision of the Court of Appeal in Dines and Others v (1) Initial Health Care Services Ltd (2) Pall Mall Services Group Ltd [1994] IRLR 336. Schmidt v Spar was a decision on the interpretation of the Acquired Rights Directive. Dines was a decision on the interpretation and application of the 1981 Regulations, bearing in mind that the 1981 Regulations were intended to give effect in the United Kingdom to the Directive and ought, therefore, in accordance with well-established principles, to be interpreted to give effect, if possible, to the terms of the Directive.

At the hearing today we have, therefore, only heard submissions from Mr Swift. Those submissions are largely based on the law as laid down in those two cases, applied to the facts found by the Chairman.

In the reasons for the decision, the Chairman identified the preliminary issue before him as whether or not there was a transfer of an undertaking from Compass to ARAMARK. He stated the facts found by him as follows:

4. (a) The Royal School of Artillery at Larkhill Wiltshire has a requirement for catering and cleaning services. These services are provided by an outside contractor who is awarded a contract by the Ministry of Defence (MOD) following a process of competitive tendering. The contract exists between the MOD and the service provider.

(b) Compass had a contract for the provision of [the catering and cleaning] services which was due to expire on the 1 July 1993."

At the beginning of July the Ministry of Defence initiated a new tendering process for a successor contract. Compass bid again, but this time lost the contract to ARAMARK.

The Chairman found that:

"4 (c) Whichever organisation was to succeed was to operate on terms somewhat different from the contract expiring on 1 July 1993. In particular in the catering area the new contractor would have responsibility for running the finances of the mess, including purchasing and maintaining stock and billing the members of the mess on a monthly basis. In respect of the cleaning requirement there was a slightly larger area to be covered ..."

There was a reduction in the number of hours per week for domestic assistance.

ARAMARK, having secured the contract, took on cleaning and catering under the new terms on 2 July 1993.

"4 (e) When ARA commenced the new contract it moved on to Larkhill all its own equipment and materials, minibus, computer and other supplies. It set up its own administration for the contract, using its own procedures, systems and management structure. No money, materials or anything of any description passed from Compass to ARA. Compass left the site and removed its own equipment and materials.

(f) In respect of the catering side ... this was carried out using MOD buildings and plant and ... food materials.

(g) No contractor has owned, leased or held under licence any part of the site.

(h) Following the award of the contract to ARA its representatives met with Compass employees and circulated job application forms, made job offers ... [and] all post established by ARA for the new contract were filled [by 21 June]. ...

(i) The task carried out by the employees for Compass and ARA at Larkhill was not one requiring great skill, it is not specialist work."

There was no contract ever made between Compass and ARAMARK. No assets passed from one to the other.

"4 (j) Compass ceased work at Larkhill on 1 July 1993, ARA commenced work on the 2nd July 1993 carrying out the same type of tasks but employing its own systems and procedures."

On those facts, the position taken by the parties was this:

"5. Compass contends that when its contract came to an end the contracts of those employed on the contract immediately prior to the 1 July 1993 transferred to ARA and so liabilities under those contracts were inherited by ARA. Thus it argues ARA has responsibility to the claims brought before the tribunal by the Applicants who were not employed by ARA when Compass left Larkhill on the 1 July 1993. It relies on Transfer of Undertakings Regulation 1981 (TUPE) and the Acquired Rights (ARD) Directive. ARA argues that on the fact [the 1981 Regulations and the Directive] cannot apply and the fact of a change in a service provider does not in itself mean that there is an undertaking transfer within [the 1981 Regulations]."

The Chairman referred in the decision to the European Court of Justice case in J M A Spijkers v Gebroeders Benedikt Abbattoir CV and Others [1986] and the Employment Appeal Tribunal decisions in Wren and Others v Eastbourne Borough Council and UK Waste Control Ltd and Dines and Others v (1) Initial Health Care Services Ltd and (2) Pall Mall Services Group Ltd.

Applying the law, as stated in those decisions, to the facts, the Chairman came to two conclusions. First, that there was no undertaking. He said in paragraph 7:

"Looking at the first question that of whether or not there was an `undertaking' or `the identifiable economic unit' as it is often put, having regard to the particular circumstances of this case, the conclusion is that there is not."

The reasoning which led him to this conclusion was that, having:

"regard to the characteristics of the contract and the parties, there was no capital, or assets which passed, no goodwill, no specialist knowledge or skill. The organisation under the new contract was different. [In his view] What happened was that Compass' business at Larkhill ceased when the contract expired and ARA took on a new contract on new terms from [the Ministry of Defense]."

He then went on to consider the question whether, if there was an undertaking, had there been a transfer? In paragraph 8 of the decision he said:

"I find that there would not have been a transfer. The fact that some staff employed by Compass were employed by ARA subsequently is not ... a factor which would create a transfer."

He concluded that, on the facts relating to the 1981 Regulations, the Directive and the approach suggested by the EAT in Dines, there could not be said to have been a transfer, even if there had in the first place been an "undertaking".

The arguments by Compass on this appeal are based on three grounds, which summarize conveniently 10 paragraphs set out in the notice of appeal. The first ground of appeal is that the Tribunal erred in law in coming to the conclusion that there was no undertaking or identifiable economic unit. It is submitted that, in coming to that conclusion, the Tribunal took into account irrelevant factors and failed to take into account relevant factors on that issue. The main point made by Mr Swift was that it was irrelevant for the Tribunal to take into account the fact that there was no passing of assets from Compass to ARAMARK of capital goodwill, specialist knowledge or skill or any other form of assets. The submission was that:

"When determining whether or not there was an identifiable economic unit in the hands of the transferor it is irrelevant to consider what passed from the transferor to the transferee [from Compass to ARAMARK]. Whether or not there was an economic unit in the hands of the transferor depends on an analysis of the [nature, conduct and organization of the activities of the transferor].

It is also irrelevant to have regard to the fact that there is no direct contractual relationship between the transferor and the transferee and, finally:

"the fact that Compass' workforce was an unskilled workforce"

is not relevant to whether or not there is an economic unit.

We agree with those submissions. The Chairman of the Tribunal did not have the benefit of the reasoning of the European Court of Justice or of the Court of Appeal in relation to these matters. In the case of Dines it was not an issue before the Court of Appeal whether there was an undertaking. That had been decided positively in favour of an undertaking by the Industrial Tribunal. But it is clear from the reasoning of the European Court of Justice in the case of Schmidt that, if there was an undertaking or part of an undertaking existing in that case, where only one employee was engaged in cleaning services, then, a fortiori, there is an undertaking in this case, where a far larger number of employees were engaged in the activities of cleaning and catering. We find on the first point that there was an error of law by the Tribunal in its conclusion that there was no undertaking to be transferred.

The second ground of appeal was that the Tribunal erred in law in holding that there was no transfer from Compass to ARAMARK. In reaching this conclusion, reliance was placed on the fact that there was no direct contractual relationship between the first and second contractor, that no assets passed from one to the other and that ARAMARK won the contract to provide the services in competition with Compass.

Again, we agree with Mr Swift that there was an error of law in the approach taken by the Chairman. As appears from the recent decisions, the crucial test as to whether there is a transfer or not is whether or not the economic unit or undertaking retains its identity and continues in the different hands of the transferee. The Tribunal did not address that crucial aspect of the case.

This brings us to the third ground of appeal. That is that the decision is one which, if the Tribunal had correctly addressed itself to the law, no reasonable Tribunal could have reached the conclusion that there was no transfer of an undertaking. The importance of this point is that if we are satisfied that it is a "perverse" decision, it is not necessary for us to remit the case to the Industrial Tribunal to reconsider the earlier decision in the light of our ruling. It is a case in which we are able to give our own decision on the facts found, on the basis that any Tribunal to which the matter was remitted would be bound to come to this one conclusion.

The grounds for saying that this was a decision that no reasonable tribunal could come to are these: that it was found on the facts that before 1 July 1993 Compass provided catering and cleaning services at the school. Secondly, after that date, ARAMARK provided essentially the same services at the same site. There were some variations, but substantially it was the same activity which was continued by ARAMARK and, thirdly, staff employed by Compass, before it lost the contract, were employed by ARAMARK after that date, carrying out the same functions in the same place.

Mr Swift has referred us to the relevant passages in the case of Schmidt, in particular, paragraphs 12 to 15 and 17 and 20. He has also referred us to the relevant paragraphs in the report of the Court of Appeal's judgment in Dines in the IRLR at paragraphs 42 of the judgment of Lord Justice Neill and also paragraphs 51 and 52. He has persuaded us that we should take the same course as was taken by Lord Justice Neill in the Dines case. There is no point in remitting this case to be reheard by the same or another industrial tribunal. All the relevant facts have been found by the Chairman. On the basis of those facts there is only one permissible option. That is to hold that there was a transfer of an undertaking from Compass to ARAMARK for the purposes of the 1981 Regulations.

The appeal is accordingly allowed.