United Kingdom Employment Appeal Tribunal

BAILII case number: [1994] UKEAT 645_93_2610

Appeal No. EAT/645/93

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 26 October 1994

Before

THE HONOURABLE MR JUSTICE PILL

MR E HAMMOND OBE

MRS M E SUNDERLAND JP

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MR D A LUNN          APPELLANT

MR G A JACKSON          RESPONDENT

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellant MR M BRITTAIN

(Of Counsel)

Messrs Frank & Caffin

Solicitors

Princes House

Truro

Cornwall

TR1 2EY

For the Respondent NO APPEARANCE

OR REPRESENTATION


 


MR JUSTICE PILL: This is an appeal by Mr D.A. Lunn against the Decision of the Industrial Tribunal held at Truro on 25 June 1993, whereby the Tribunal unanimously dismissed Mr Lunn's Application for a redundancy payment.

Mr Jackson was the proprietor of a business supplying pets and associated goods. It operated from two sites, one at Pannier Market, Truro, the other at Carnon Downs Garden Centre, about three miles from that city.

Mr Lunn had worked for Mr Jackson for many years, there being some doubt as to whether it is nine or ten years up to 1993. In 1992 Mr Jackson became the Manager of both establishments to which we have referred. During the hearing there was evidence as to the time he spent at each of the establishments. There was a Supervisor at each of them. It was accepted that the general pattern was that Mr Lunn spent more time at the Pannier Market than he did at Carnon Downs.

In 1989 there were discussions about Mr Jackson and Mr Lunn going into partnership in the business and the parties were on good terms. In 1992, Mr Jackson found himself in financial difficulties partly because of a large increase in the rent he had to pay at the Pannier Market. He needed cash and negotiated with Mr Lunn for the sale to him of a part of the business. Mr Jackson conducted his own negotiations. Mr Lunn was represented by a Solicitor, but having regard to the findings of the Tribunal nothing turns upon that.

In their Reasoned Decision the Tribunal refer to "Heads of Agreement which were drawn up" but they accepted that the earlier Heads of Agreement were merely background material and not the basis for the contract which was eventually made.

A written agreement was signed after the date for completion within the agreement had passed. Amongst other things, the agreement provided at Clause 1(b) for the transfer of the fixtures and fittings, equipment and all stock in trade upon the Vendor's premises at the Carnon Downs Garden Centre as at Saturday, 30 January 1993, and the Talbot Express van, registration number E 652ORL, all of which property the Vendor warrants to be his sole unincumbent property. It was provided that what is included within that clause, among other things, would be sold by Mr Jackson and purchased by Mr Lunn. The completion date was stated to be 3 February 1993, and the purchase price was £15,000.

Before that agreement was signed Mr Jackson had written a letter to Mr Lunn at Mr Lunn's request. Its terms are set out in full in the Tribunal's Reasons but we recite it so that this judgment is self contained:

"As you are already aware, we are in the final stages of selling off the whole of the Carnon Downs part of the company and completion is due in the very near future. This sale is a necessary part of the financial re-structuring we are having to carry out to meet the pressing demands of our creditors.

An unfortunate result is that we shall have to dispense with your services as Manager on Saturday 6th February and you should consider this letter as formal notice of redundancy from that date. Your salary and outstanding holiday pay will be paid up to that date, but because of the financial situation referred to above, we shall be unable to pay any salary in lieu of notice nor any redundancy pay.

Best wishes for the future and any undertaking in which you may be engaged".

The Tribunal did, no doubt upon the basis of evidence which they had heard, consider what the purpose of that letter might be. It was handed to Mr Lunn on 20 January. On 30 January, as the Tribunal found, Mr Lunn took over and operated the Carnon Downs part of Mr Jackson's former business for his own profit. Nothing turns upon the fact that the Tribunal found that date whereas the agreement itself was expressed to take effect on 3 February.

The facts are somewhat unusual in that the purchaser of part of the business was an employee of the Vendor. That, however, is not a unique situation and will occur from time to time. Read by itself the letter, to which we have referred, is in plain terms. It is that of an employer dispensing with the services of an employee from a date stated and giving the reason for the termination as redundancy. Clearly, if Mr Jackson was selling a part of his business he would have less need for a Manager than while the business was on a scale where two premises were involved.

Having set out the facts, the Tribunal addressed themselves to the issues before them. It may be noted that in addition to oral submissions they received from each party a letter subsequent to the oral hearing, but nothing turns upon that. They clearly had regard to the contents of the two letters addressed to them. Mr Jackson had argued that in reality he had not dismissed Mr Lunn. The Tribunal (paragraph 16) stated as follows:

"Whilst in the Industrial Tribunal we do try to take account of the realities rather than mere form, it is difficult in our judgment to avoid the conclusion that the letter of 20th January cannot by anything other than a dismissal in its very clear terms".

At its lowest, in our view, that was a finding which the Tribunal were entitled to make. They rightly decided that the next question to be considered was the reason for that dismissal. In paragraph 18 they stated as follows:

"We conclude that there was indeed a dismissal. The next question is the reason. Clearly, that is redundancy. He was no longer required by Mr Jackson, either full-time at the Pannier Market or to operate the Carnon Downs department".

That too, in our judgment, is an unimpeachable finding. The scale of Mr Jackson's business had diminished. It is no surprise that he no longer required a Manager for the business and it is no surprise whatever, that on the evidence before them the Tribunal held that Mr Jackson had been made redundant.

The Tribunal then went on to consider who was liable for the redundancy payment. They clearly took the view that a payment was appropriate. Reference was then made to the Transfer of Undertakings (Transfer of Employment) Regulations 1981. It appears to have been Mr Jackson who raised that question and the sending to the Tribunal of letters post-hearing may well have occurred because it had not been foreseen that the case for Mr Jackson would be put quite in the way it was. At paragraph 21 of their Decision the Tribunal set out Regulation 5.

Regulation 5(1) provides:

"A relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred, but any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee".

Having set out that and Regulation 5(2) the Tribunal stated in paragraph 22:

"In our judgment, the effect of that is to place the liability onto the purchaser who was Mr Lunn himself".

On behalf of Mr Lunn, Mr Brittain has submitted first, that the findings of the Tribunal as to dismissal and as to the reason for dismissal were findings which were properly made upon the evidence and indeed Mr Jackson, who does not appear today, has by his response to the Notice of Appeal adopted the approach of the Tribunal.

Mr Brittain goes on to submit that in the circumstances and upon the Tribunal's finding of fact, Regulation 5 has no Application. The Regulations he submits, by reference to Harvey, do not operate if the contract would otherwise have been preserved, or if the contract is terminated otherwise than by the act of transfer, for example formal dismissal or resignation. There was a dismissal and the Regulation can have no Application in those circumstances. The reason for dismissal was redundancy and there was no operation of the Regulation so as to continue Mr Jackson's contract of employment with Mr Lunn.

It is perhaps a surprising feature of the Tribunal's Decision that they have made no finding as to the date upon which the contract was terminated. Mr Jackson maintained that it was 6 February, that is the date in the letter. Mr Lunn, for reasons which are not entirely clear, stated in IT3 that it was 30 January and that argument was put forward on his behalf at the Tribunal.

It seems to us, though we do not need to decide the point and it is not crucial to our Decision, that the date in the letter was the date of termination, that is 6 February, as indeed Mr Jackson argued.

We accept the submissions of Mr Brittain. In the circumstances and upon the facts found by the Tribunal, Regulation 5 does not operate. Whether termination of the contract of employment was upon 30 January or upon 6 February, the reason for it is clearly stated in the letter handed over on 20 January and found by the Tribunal to have been a letter of dismissal. It expressed that the dismissal was by reason of redundancy and the Tribunal so found.

In our judgment, the Tribunal erred in law in finding as they did, and as they did without giving reasons, that the effect of Regulation 5 was to place the liability for the redundancy payment on the purchaser. The only finding open to the Tribunal upon the evidence and their finding was that Mr Lunn was entitled to a redundancy payment. In those circumstances, this appeal is allowed and the matter is remitted to the Industrial Tribunal not to rehear any questions of liability, but to assess, if it is not agreed between the parties, the amount of the appropriate redundancy payment.