United Kingdom Employment Appeal Tribunal

BAILII case number: [1994] UKEAT 693_93_2303

Appeal No. EAT/693/93

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 23rd March 1994

Judgment delivered on 26th July 1994

Before

HIS HONOUR JUDGE J PEPPITT QC

MRS T MARSLAND

MR J C RAMSAY

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PHOTOSTATIC COPIERS (SOUTHERN) LTD          APPELLANTS

(1) MR T OKUDA

(2) JAPAN OFFICE EQUIPMENT LTD (IN LIQUIDATION)          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellant MISS IJEOMA OMAMBALA

(of Counsel)

Berrymans

Salisbury House

LONDON EC2M 5QN

For the Respondents (1st) MR C CARSTAIRS

Solicitor

Citizens Advice Bureau

Legal Service

Chelsea Old Town Hall

Kings Road

LONDON SW3 5EE

No attendance or Representations by the 2nd Respondents


 


HIS HONOUR JUDGE PEPPITT QC This is an appeal from a decision of the London (South) Industrial Tribunal sent to the parties on 13th July 1993. The Tribunal decided, after a hearing which extended over three days, that the Respondent, Mr Tazo Okuda, had been unfairly dismissed by the Appellants, Photostatic Copiers (Southend) Ltd and awarded him compensation in the sums of £396 and £5,012 by way of basic and compensatory awards respectively.

The Appellants appeal against the Tribunal's decision on grounds of misdirection and perversity. Their Notice of Appeal runs to some 7¹/₂ closely typewritten pages. They also seek orders under Rule 27(1) of the Employment Appeal Tribunal Rules 1993 (i) for leave to adduce in evidence two further documents and (ii) for an order that a Mr Alan Stanton, the accountant to Photofax (Essex) & Co Ltd, give evidence before us producing any documents in his possession which relate to payments by that company to the Respondent. To put all this into perspective it will be necessary for us to give a brief resume of the facts found by the Tribunal.

The Respondent entered into the Appellants' employment on 3rd May 1989 as a salesman selling office equipment to Japanese companies. The Appellants were then trading under the name `Japan Office Equipment' from premises in Danbury Street, London. The Company was controlled by Mr Roy Chandler who was also its managing director.

In December 1989 a new company, Japan Office Equipment Ltd, was incorporated. That company too was controlled by Mr Chandler who was also its managing director. On 8th January 1990 Mr Chandler issued a memorandum to all staff that their employer was in future to be Japan Office Equipment Ltd and that their contracts of employment were to be transferred to the new company. The Tribunal accepted the Respondent's evidence that he never received this memorandum and that he continued to be paid by the Appellants, his P60 for the year ended 5th April 1990 showing the Appellants as his employers.

In these circumstances the Tribunal found at paragraph 4 of its Decision that the Respondent continued to be employed by the Appellants after 8th January 1990. The Tribunal did not find that there had been a transfer of the Appellants' undertaking as the Appellants had alleged.

By the autumn of 1991 Japan Office Equipment Ltd was encountering financial difficulties and Mr Chandler told the Respondent that as a result he was to become self-employed. No date however was given for the change of status. By the end of October 1991 there were only two employees at the Danbury Street premises, the Respondent and a Mrs Tanaka. In February 1992 Mrs Tanaka was made redundant. In the same month the Respondent was told by Mr Chandler that the Danbury Street premises were to close and that he was in future to be self-employed. He was told to work from home reporting on one day each week at the Appellants' Basildon office. The Respondent said that he would think about it.

On 4th March 1992 the Respondent informed Mr Chandler that he was not prepared to accept self-employment. Mr Chandler replied "What can I say?" and handed the Respondent his P45.

The Tribunal rejected Mr Chandler's evidence that the Respondent had agreed in December 1991 to act in future for Japan Office Equipment Ltd on a self-employed basis and that accordingly the Respondent's employment with that company had then come to an end. On the contrary the Tribunal found that the Respondent continued to be employed by the Appellants until 4th March 1992 when they dismissed him. By then Japan Office Equipment Ltd had gone into liquidation. The Tribunal however found that since the Appellants were then prepared to continue to use the Respondent's services, albeit on a self-employed basis, there was clearly work still available for him to do and thus the definition of redundancy in S.81(2) of the Employment Protection (Consolidation) Act 1978 had not been satisfied. Moreover, the alternative of self-employment offered to the Respondent was `not a valid alternative' and accordingly the dismissal was unfair.

The Tribunal also considered, and rejected, an allegation by the Appellants that the Respondent had contributed to his dismissal within the meaning of S.74(6) of the Act by working for a business rival, Photofax (Essex) & Co Ltd, in breach of the duty of confidence which he owed to his employers. This allegation was rejected on the ground that it was not known to the Appellants when they dismissed the Respondent but the Tribunal clearly had misgivings about the Respondent's account of his relationship with Photofax. Of this relationship the Tribunal said at paragraph 11 of its decision:

"... in this one area the (Respondent's) evidence was unsatisfactory. He contradicted himself on the question of whether he had visited the (Appellants') client, Nippon Books, or not. He did not supply an adequate explanation as to why Photofax had printed visiting cards in his name. Finally, he told the Tribunal that having been invited to join Photofax, he did not know the amount of money they were intending to pay him. The Tribunal found this hard to believe."

This passage is to be contrasted with the finding in paragraph 1 of the decision that:

"... Wherever there was a conflict of evidence, the Tribunal preferred the evidence of the (Respondent)."

These findings by the Tribunal as to the creditworthiness of the parties are important in the context of the Appellants' application under Rule 27(1) of the Employment Appeal Tribunal Rules 1993. The facts upon which the application was based are set out in an affidavit sworn by Mr Chandler on 21st April 1994. It appears that on 28th February 1994 the Appellants received two documents through their facsimile machine. The first, under the letterhead of Photofax (Essex) & Co Ltd purported to be a record of three cheques totalling £1,180 paid to the Respondent by that company in March and April 1992. The letters bore the signature `D Casson', who was at one time a director of Photofax (Essex) & Co Ltd. The second document was in the form of a bank statement issued by the St Paul's Branch of National Westminster Bank Plc which purported to record the receipt by the account-holder of the proceeds of those cheques.

Mr Chandler regarded those documents as important because in his evidence to the Tribunal the Respondent had said that he had never worked for Photofax but on the contrary had remained unemployed from the date of his dismissal until 1st July 1992. So he telephoned Mr Alan Stanton, the accountant to Photofax, and asked him if the Respondent had received payment from that company. Mr Stanton's reply, according to Mr Chandler was as follows:

"Mr Stanton said that he could not divulge this information to me due to client confidentiality but he would be prepared to go to the Tribunal hearing with or without the account books and records of Photofax Ltd if he was ordered to do so by the Tribunal. He said that if he was ordered to attend it would be of benefit to the (Appellants') Case."

The Respondent put before us an affidavit sworn by David Casson on 20th April 1994. Mr Casson said that the first document was a forgery. He had not signed it and the telephone and facsimile numbers shown in the letterhead had been changed `no later than January 1992'. Moreover no such payments had been made by Photofax to the Respondent at any time.

We have serious misgivings about the source of the two documents which on their face give cause for suspicion. In the first place, neither contains the sender's facsimile number; Mr Chandler seeks to explain this by saying that the original facsimile print had been on flimsy paper and it was the practice of the Appellants to photocopy facsimiles on to standard paper and to destroy the original. That had been done in this case and the original destroyed. Unfortunately in the photocopying process the sender's facsimile number had been lost. Secondly, the document purporting to be a bank statement was not suggested to be in the Bank's common form, and contained no indication of the identity of the account-holder. Finally, a layman's comparison between the signatures on the purported Photofax letter and Mr Casson's affidavit suggests that the two might not have been written by the same hand.

In these circumstances we would not ordinarily attach any weight whatever to an anonymous communication of this nature. However, the matter does not end with the two documents themselves. The extent of the Respondent's association with Photofax both before and after his dismissal was a very live issue before the Tribunal and in June 1991 the Appellants obtained injunctions against Photofax restraining them from soliciting the Appellants' customers. The Respondent was alleged to have been a significant factor in this soliciting. The injunctions were in force at the date of the hearing before the Tribunal and in order to establish a link between the Respondent and Photofax the Appellants sought disclosure of the Respondent's bank accounts. The Tribunal, following Nasse v. Science Research Council [1979] ICR 921 inspected the accounts, decided that `they did not directly enable the Appellants to advance their own case or damage their opponent's' and refused the application. The Tribunal's findings, after such inspection was that:

"Although the respondent was considering working for Photofax he received no payment from them and withdrew from any such potential employment when litigation between the appellants and Photofax began." [Paragraph 3 of the Decision].

In the course of his argument against the admission of fresh evidence Mr Carstairs, on behalf of the Respondent, very properly brought to our attention the fact that his client admitted receipt of one payment by Photofax. Mr Carstairs did not give any details of the payment nor did we invite him to do so. But on the face of it the Respondent's admission is inconsistent with the evidence which he gave to the Tribunal and inconsistent with a material finding which the Tribunal made.

It is against this background that we must consider the Appellants' application to adduce further evidence. It was agreed by the parties from the outset that we could not hear the evidence ourselves and that we should regard the application as an application for the remission of the case to enable the Tribunal to hear it. The test for the evaluation of such an application is that laid down in Wileman v. Minilec Engineering Ltd (EAT) [1988] ICR 318, namely that fresh evidence would only be admitted if it complied with the requirements of Rule 10 of Schedule 1 to the Industrial Tribunal (Rules of Procedure) Regulations 1985 governing a tribunal's power to review:

(i) the new evidence must have become available since the conclusion of the hearing

(ii) its existence could not have been reasonably known or foreseen

(iii) the new evidence must be relevant, probative and likely to have an important influence on the result of the case.

Condition (i) is clearly satisfied. As to condition (ii), we do not consider that the existence of the new evidence could reasonably have been known or foreseen by the Appellants. Whatever may have been their suspicions they were not permitted to examine the Respondent's bank accounts and they could not reasonably have elicited the support of a company with whom they were locked in litigation. The potential value of the evidence under question (iii) is more questionable. We disregard the anonymous facsimile messages and consider only Mr Stanton's cryptic offer of assistance and the admission made on the Respondent's behalf that he received a payment from Photofax. The Respondent's admission at face value seems to us likely to have an important influence on the result of the case if only in the context of compensation. That admission and the evidence helpful to the Appellants which we are told Mr Stanton will give might have a wider effect if it is accepted by the Tribunal. This is a case in which the Tribunal was plainly concerned about parts of the evidence given by the Respondent. We therefore feel that the interests of justice require that the fresh evidence should be heard.

We propose therefore to order that the case be remitted to the same Industrial Tribunal to enable it to hear further evidence relating to any payment or payments made to the Respondent by Photofax. The Tribunal will no doubt issue a summons requiring the attendance of Mr Stanton at the remitted hearing if this is necessary. We also wish to make it clear that we express no view upon the nature and quality of the fresh evidence that the Appellants seek to adduce. That will be a matter for the Tribunal who will be free to review their decision in the light of the fresh evidence to the extent, if any, which they consider appropriate. If the fresh evidence is accepted by the Tribunal it may have effects extending beyond the issue of compensation to which it narrowly relates. It may, though this is a matter for the Tribunal, go to the Respondent's overall credit. All this lies within the purview of the Tribunal.

We wish to say in conclusion that this case should create no precedent upon the admissibility of fresh evidence. The facts which we have had to consider are unusual, if not unique, and we have a nagging doubt that the Tribunal might not have heard the whole story.

At the commencement of the hearing of the appeal we decided that if we remitted the case to the Tribunal to enable the fresh evidence to be heard we should not entertain the Appellants' allegations of perversity until the Tribunal had had availed itself of the opportunity to reconsider its findings in the light of that fresh evidence. But we invited the parties to consider whether they wished to address us on those parts of the Notice of Appeal which raised questions which could be answered independently of the Appellants' application to adduce fresh evidence. In response to this invitation Miss Omambala made submissions under paragraphs (VI)A (XI), (XVII) and (XIX) of the Amended Notice of Appeal and Mr Carstairs replied on behalf of the Respondent. It seems to us that we can properly consider these submissions without in any way fettering the wide-ranging power of review the Tribunal will have upon remission of the case.

Paragraph (VI)A of the Amended Notice of Appeal

Miss Omambala submitted that:

(i) the Tribunal's finding that the Respondent continued (after the end of 1989) to be employed by the Appellants was `perverse and contradictory'.

(ii) On the evidence before it the Tribunal should have found that at the end of 1989 there had been a transfer of the Appellants' undertaking to Japan Office Equipment Ltd.

(iii) Upon such transfer the Respondent's contract of employment would have taken effect as if originally made between the Respondent and Japan Office Equipment Ltd. [See Regulation 5(1) of the Transfer of Undertakings Regulations 1981]

It was not suggested that we should express a view upon these submissions at this stage since they depend for their success upon the Appellants' allegation of perversity. On one reading of the decision however, the Tribunal appears to have decided that since the Respondent was given no notice of a transfer of the Appellants' undertaking he continued to be employed by the Appellants. The relevant findings were as follows:

"On 8 January 1990 the new company's managing director, Mr Chandler, issued a memorandum to all staff that their employer was now to be Japan Office Equipment Ltd and that their contracts of employment had been transferred. The applicant said that he never received that memorandum; Mr Chandler for the (Appellants) said that it was sent to every member of staff. He said it was put in an envelope with the person's name on it and it was probably given to the post lady to send out. The Tribunal preferred the evidence of the (Respondent) on this. Evidence was provided by the (Respondent) that he continued to be paid in the same fashion; his P60 for the year ending 5 April 1990 gave his employer as the (Appellants) and leasing agreements signed with clients continued to be made in the name of Japan Office Equipment rather than Japan Office Equipment Ltd." [paragraph 2]

And later

"The Tribunal is satisfied that the respondent continued to be employed by the (Appellants)" [paragraph 4]

Miss Omambala submitted that neither the Transfer of Undertakings Regulations 1981 nor any other enactment provided for an employee to be given notice of a transfer. The absence of such notice did not invalidate the transfer of an undertaking which otherwise satisfied the requirements of Regulation 3(1) and the test laid down by J M Spijkers v. Gebroeders Benedik Abattoir CV and Anr. [1986] CMLR 296. In such a case the effect of Regulation 5(1) was to provide for an automatic continuation of the employee's contract of employment with the transferee substituted for the transferor. The transfer had this effect whether or not the employee consented or was even aware of the substitution. This, said Miss Omambala, was the ratio of Berg and Busschers v. Besselsen [1990] ICR 396 ECJ. The only provision for notice in the 1981 Regulations was that contained in Regulation 10 which imposed upon the transferor an obligation to give information concerning the transfer to the trade union representatives of affected employees. Failure to give that information however does not invalidate the transfer [Regulation 11]. In any event there were no trade union representatives concerned here.

Finally, Miss Omambala drew our attention to the amendments to Regulation 5 of the 1981 Regulations made by S.33(1) of the Trade Union Reform and Employment Rights Act 1993. These amendments, which only came into effect on 30th August 1993 and thus have no direct bearing on the case before us, read as follows:

"4A Paragraphs (1) and (2) above shall not operate to transfer his contract of employment and the rights, powers, duties and liabilities under or in connection with it if the employee informs the transferor or the transferee that he objects to becoming employed by the transferee.

4B Where an employee so objects the transfer of the undertaking or part in which he is employed shall operate so as to terminate his contract of employment with the transferor but he shall not be treated, for any purpose as having been dismissed by the transferor."

Miss Omambala accepted that the effect of these new provisions was to make it necessary for the employee to be informed of the transfer of the undertaking before his contract of employment was transferred to the transferee. For without such knowledge the employee would be unable to exercise his right to object to becoming employed by the transferee. But, she submitted, the employee's right so to object did not arise until the passing of the 1993 Act. Until then there was nothing in the 1981 Regulations which required either party to the transfer of the undertaking to inform the employee of it.

We have considered Miss Omambala's submission with some anxiety because it seems to us that if it is well-founded a statutory provision designed to protect employees would have the effect in a case such as this of depriving the employee of one of his essential rights -that of knowing who his employer is. He would not know from whom to accept instructions. He would not know upon whom to serve notice terminating his employment. He would not even know the source of his salary. Can Parliament have intended by a side-wind to create such a bizarre situation?

We do not think so. At common law the substitution of one employer for another can be effected only by a novation of the contract of employment. Such a novation would require both the knowledge and the consent of the employee. The effect of Berg v. Besselsen (supra) has been to abrogate this common law rule in the case of transfers of undertakings by obviating the need for the employee's consent. But it seems to us that there is nothing in that decision or in the 1981 Regulations which justifies any further departure from the recognised principles of contract. In particular there is no reason to jettison the principle that novation of a contract requires at least the knowledge of all parties affected by it. In our judgment, therefore, in the case of a transfer of an undertaking Regulation 5(1) of the 1981 Regulations did not before the passing of the Trade Union Reform and Employment Rights Act 1993 and does not take effect in relation to an employee's contract of employment unless and until the employee is given notice of (i) the fact of the transfer and (ii) the identity of the transferee. We therefore reject Miss Omambala's first submission.

Paragraph XI of the Amended Notice of Appeal

In paragraph 4 of its decision the Tribunal found as follows:

"Even if there had been a transfer of the undertaking, which the Tribunal does not find, the Tribunal is satisfied that the two companies were associated companies for the purposes of S.153(4) of the Employment Protection (Consolidation) Act 1978 ...

That being so both companies were controlled by Mr Chandler and were associated companies for the purposes of section 82(2) of the Act."

Miss Omambala accepted that the two companies, namely the Appellants and Japan Office Equipment Ltd were indeed associated companies within the meaning of S.153(4) of the Act. But if and insofar as the Tribunal relied upon that association in deciding whether or not the Appellants' undertaking had been transferred she submitted that the Tribunal misdirected itself. Section 81(2) of the Act (to which the Tribunal must be taken to have referred) was concerned with redundancy and not the transfer of undertakings. Mr Carstairs, on behalf of the Respondent, conceded that this submission by Miss Omambala was well-founded and we agree.

Paragraph XVII of the Amended Notice of Appeal

We heard submissions upon the Tribunal's findings as expressed in paragraph 6 of the decision but upon reflection we consider that those submissions should be considered, if they remain of relevance, after the Tribunal has had the opportunity to consider the fresh evidence.

Paragraph XIX of the Amended Notice of Appeal

In paragraph 11 of the decision the Tribunal having considered the Respondent's relationship with Photofax decided that "... it would be just and equitable to reduce the compensatory award" but "was not prepared to refuse to make any compensatory award".

In paragraph 12 of the decision the Tribunal made a compensatory award of £5,012 calculated as follows:

4 months at £1,200 per month £4,800

Loss of statutory rights 100

Expenses 112 £5,012

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Miss Omambala submitted that the Tribunal misdirected itself in failing to make any reduction in the compensatory award notwithstanding its finding that it would be just and equitable to do so. We cannot agree. The Respondent's evidence, which the Tribunal accepted, was that he remained unemployed for four months after his dismissal. Thereafter he obtained employment as a self-employed salesman with a guaranteed commission of £600 per month plus a discretionary bonus. The Tribunal compensated the Respondent in the full amount of his pre-dismissal salary during the four months of his unemployment but made no award to reflect his partial loss of earnings thereafter. There is therefore on the face of the decision a clear indication that the Tribunal reduced the Respondent's compensatory award by restricting it to the period of four months during which he was unemployed.