United Kingdom Employment Appeal Tribunal

BAILII case number: [1994] UKEAT 715_93_1703

Appeal No. EAT/715/93

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 17 March 1994

Before

THE HONOURABLE MR JUSTICE MUMMERY (P)

MR J H GALBRAITH CB

MS D WARWICK

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SOUTHLANDS PRINT AND SUPPLY          APPELLANT

MR H R GRAHAM

MR M RUSSELL          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellant MR PAUL GILROY

(OF COUNSEL)

Messrs Lopian

Wagner

St Johns House

2-10 Queen Street

Manchester M2 5LH

For the Respondents MISS I SIMLER

(OF COUNSEL)

Messrs Kershaws

Solicitors

160 Brompton Road

Knightsbridge

London SW3 1RP


 


MR JUSTICE MUMMERY (PRESIDENT): This is an appeal against the decision of the Industrial Tribunal held at Manchester on the 24 May 1993. For the full reasons notified to the parties on the 27 July last year, the Tribunal unanimously decided that the applicants, Mr Graham and Mr Russell, were entitled to redundancy pay in respect of their dismissal by the second respondent, Orion Print, and by virtue of the Transfer of Undertakings Regulations 1981, liability for such redundancy payments fell on the third respondent, Southlands Print and Supply. The Tribunal also decided that the dismissal of Mr Graham and Mr Russell by the second respondent was automatically unfair. By reason of the 1981 Regulations liability for unfair dismissal compensation fell on the third respondent. The respondents were dissatisfied with the decision. A Notice of Appeal was issued by the third respondent on the 3 September 1993. The question on this appeal is whether the decision of the Tribunal was flawed by one or more errors of law.

In order to understand the points taken on the appeal, it is necessary to look at the background facts. The facts found by the Industrial Tribunal were these. Mr Jordan, during the 1980s, operated a printing business under various names at various addresses. In May 1988 the business, which was then trading under the name Advertising Print Ltd, went into liquidation. Mr Graham and Mr Russell were employed in that business. They received redundancy payments from the Secretary of State. Two weeks later they were re-engaged by another Company, called Ribchester Ltd. Ribchester Ltd were the first respondents in these proceedings before the Industrial Tribunal. It then traded as Allied Commercial Supplies. There was no suggestion that the continuity of service of the employees were preserved during those events.

The Tribunal concentrated on the events which occurred after May 1989. From May 1989 Mr Graham and Mr Russell were employed by Ribchester Ltd. Mr Graham was the Production Manager, Mr Russell a Printer. Mr Jordan was a Director of Ribchester. He was also the sole proprietor of a firm called Orion Print, which carried on business as print agents, distributing printing work to companies, including Ribchester. In December 1991, a winding-up order was made against Ribchester. Mr Russell and Mr Graham were informed that Mr Jordan would be taking them and that there was no need for them to claim redundancy payments.

At that time, (December 1991), Mr Jordan's firm Orion Print shared premises with the third respondent to the Industrial Tribunal proceedings, Southlands Print and Supply. The sole proprietor of Southlands Print and Supply was Deborah Hughes, Mr Jordan's companion. The business of that firm was to sell paper to companies such as Orion Print. Mr Jordan was an employee in that firm, not the proprietor. At the time of Ribchesters winding-up the lease on its premises at Ringley Road was due to expire. Orion Print moved premises to Dale Street, the address from which Ribchester had been operating. After the winding-up of Ribchester, Mr Jordan had two options. He could have sent the printing work formerly done by Ribchester out to other printers, or he could allow Orion Print to take over the work.

Mr Jordan gave evidence to the Tribunal that, to avoid those employed by Ribchester losing their jobs, he took the second option. Ribchester's printing business passed into the hands of Mr Jordan's firm, Orion Print. Mr Russell and Mr Graham continued working at the same premises with the same customers. In 1992 Mr Jordan found himself in increasing financial difficulty. He received advice from his solicitor in May or June that he would be made bankrupt. He telephoned Mr Graham in June and asked him whether he would like to form his own company and take over the printing business. Mr Graham considered this proposition, whether it was possible to form a cooperative, but eventually decided it was not viable, because the machinery and other assets were to remain in Mr Jordan's hands. Subsequently, Mr Graham and Mr Russell were made redundant by Mr Jordan on Friday the 17 July 1992. They told Mr Jordan they were going to claim redundancy payments. Mr Jordan said that he did not owe them redundancy money, and that in any case he did not have the money. The union representatives of Mr Graham and Mr Russell had visited the premises shortly before the 17 July to discuss the situation with Mr Jordan. He refused to see them.

Mr Jordan gave evidence to the Tribunal that his idea had been that the business of Orion Print would be wound-down, and that his companion's firm, Southlands Print and Supply, would be used as print agents, and that the printing work would be sent out to other printers. Although that was proposed, it was not what actually happened on the findings of the Tribunal. The Tribunal found that after the 17 July Mr Jordan himself was apparently doing printing jobs that were in progress. He started to send work out to other printers, but, because they were unreliable, decided to do it himself. The machinery of Orion Print was not sold. According to Mr Jordan, Deborah Hughes decided to take up the offer of running the printing business, which offer had previously been made to Mr Graham and Mr Russell. Mr Jordan himself decided to work in the print shop. In September 1992 another printer was taken on.

The Tribunal concluded that Southlands Print and Supply took over the customer base which Orion Print had previously had, and the assets of Orion Print were transferred to Southlands Print and Supply, along with three of its non-production staff, but not including Mr Graham and Mr Russell. The case for Mr Graham and Mr Russell was that their period of employment, from May 1989 to July 1992, should be regarded as continuous, since, when the business of Ribchester was put in the hands of Orion Print, the premises and customers remained the same. Similarly in July 1992 the customer base and assets were transferred to Southlands Print and Supply. The Tribunal referred to the submissions made in support of the claim made by Mr Graham and Mr Russell that they had been unfairly dismissed.

The Tribunal referred to the provisions of the Regulations and the case law which had interpreted the Regulations as applying to a transfer where a business was transferred as a going concern. The Tribunal said in paragraph 6 that:

"The fundamental question is whether one can say that after the transfer one has the same business but in different hands; alternatively, the applicant has urged us, one should ask whether the unit in question retains its identity. If it is concluded that there has been a transfer then Regulation 5(1) provides that the transfer does not terminate the contract of employment of any person employed immediately prior to the transfer; in other words the transfer will not break the continuous period of employment".

The Tribunal stated its conclusions in favour of Mr Graham and Mr Russell. The Tribunal stated this:

"In July 1992 the business of print agent and printing which had been in the hands of Orion Print was transferred to Southlands Print and Supply. The business was transferred as a going concern because Mr Jordan himself continued to carry out the printing work, the assets were transferred to Southlands, and the customer base was preserved. What occurred was therefore a "relevant transfer" within the meaning of the Transfer of Transfer of Undertakings Regulations".

Paragraph 9 I shall read in full. It was criticised by Mr Gilroy, on behalf of Southlands Print and Supply.

"Mr Graham and Mr Russell were dismissed by the second respondent, but because they were employed "immediately prior to the transfer", the effect of the Regulations is that responsibility for their dismissals is transferred along with the business to the third respondent (see Regulation 5(2)). Thus the third respondent is liable to the applicants for their redundancy payments based on a continuous period of employment from May 1989. In addition, the applicants were dismissed for a reason connected with the transfer, and by virtue of Regulation 8(1), their dismissals are consequently to the treated as unfair. Neither the second nor third respondent sought to rely on the defence in Regulation 8(2) that an economic, technical or organisational reason entailing changes in the workforce was the reason for the dismissal".

For those reasons the Tribunal made the awards. Before I turn to the submissions of the parties it is necessary to state a few points on the way in which the proceedings came before the Tribunal and were conducted there. The Notice of Application by Mr Russell and Mr Graham was presented on the 3 October 1992. The notice stated the history of the relationship between the three companies and the case of the applicants that there were transfers of businesses from Ribchester Ltd to Orion, and from Orion to Southlands. The case was clearly stated to be for redundancy payments and for unfair dismissal.

A firm of Solicitors was instructed to act on behalf of Orion Print and Southlands Print and Supply. On the 24 November they submitted Notices of Appearance. The Notice of Appearance on behalf of Orion Print stated quite simply there has been no transfer of business between Orion Print and Southlands. The applicants had never been employed by Southlands. The Solicitors, called Lopian Wagner of Manchester, also filled in the Notice of Appearance for Southlands Print and Supply in the name of Deborah Hughes.

Four points were stated. First, the applicants did not qualify for compensation for redundancy or unfair dismissal. Secondly, there was no Transfer of Undertaking between Ribchester and Orion Print, whether under the 1981 Regulations or the EEC Acquired Rights Directive. Thirdly, Ribchester did not change its name to Orion Print and went into liquidation in December 1991, and fourthly, Orion Print is no longer trading and there has been no transfer of business from Orion Print to Southlands.

It is clear from the wording of the Notice of Appearance that the Solicitors completing it were aware of the relevant provisions in the 1981 Regulations and of the possible impact of the EEC Directive. The Solicitors did not act for Orion Print and Southlands Print and Supply at the hearing before Industrial Tribunal. Mr Jordan appeared in person. He gave evidence. It is of some significance that no evidence was given by Deborah Hughes. The Chairman's notes state Miss Hughes was not called up to give evidence on behalf of Southlands Print and Supply. She agreed that she did not want to give evidence. When it came to submissions, the Chairman's notes state in connection that neither Respondent wished to make a submission to the Tribunal. The Chairman added a note that the Tribunal had found the evidence of Mr Jordan confusing and irrelevant in many cases. Questions had to be asked of him in Examination in Chief to clarify the points that he was making.

There was also before the Tribunal a document not referred to in its decision which is illuminating in the light of the submissions made on this appeal. It is page 56 in our bundle. It bears the heading of both Orion and Southlands. It reads as follows:

"Dear Client, Would you please note that as from Monday 20 July 1992, the new address for both Orion Print Services and Southlands Supplies will be: Unit 12 Dale Industrial Estate, Dale Street, Radcliffe, Manchester".

The telephone and fax numbers are given and they remain unchanged. It is signed both by someone on behalf of Orion Print Services. The name of Southlands Supplies is printed. These words are at the bottom:

"All future invoices will be issued by and payable to Southlands Print & Supply".

Mr Graham and Mr Russell had been made redundant on the Friday 17 July 1992. It is in those circumstances that this appeal has been brought. The case for Southlands Print & Supply, who are only appellants, has been ably presented by Mr Gilroy. He made four main points clearly and succinctly.

His first point was that there could be no liability on the part of Southlands Print and Supply, because there was no relevant transfer on a proper appreciation of the evidence, and the applicable Regulations. His argument was that the finding of the Tribunal was perverse. Putting it another way, he said there was an insufficient enquiry by the Industrial Tribunal as to the indicia of a relevant transfer. He referred to a number of factors relevant to the question whether there was a relevant transfer. He submitted a checklist of points relevant to this question, which had not been gone into in detail by the Tribunal; for example, a sale agreement, disposal of the premises, fixtures and fittings, stock, how work in progress was dealt with, how trade marks, patents, goodwill, customers, book debts and so were considered. His main criticism of the Tribunal's decision was that it did not appear that any detailed consideration had been given to the relevant factors. The Tribunal had simply stated in the passage I have quoted in paragraph 8 that the business had been transferred as a going concern, because Mr Jordan had continued to carry out printing work, the assets were transferred to Southlands, and customers base were preserved.

We are satisfied that there are no grounds for holding that this decision was perverse. There was ample evidence before the Tribunal from which it could hold by inference from direct evidence that there was a transfer of the business from Orion Print to Southlands Print & Supply.

The second point made by Mr Gilroy was that, under the provisions of Regulation 5(1) and 5(3), it was necessary to examine whether Mr Russell and Mr Graham were employed immediately before the transfer. His submission on this point was that the redundancy had occurred on the 17 July 1992, the date their employment ceased. Under the Regulations the contract of employment must be subsisting at the moment of, or immediately before, the transfer, he made reference to the case of Secretary of State of Employment v Spence [1986] I.R.L.R 251. The Tribunal in this case had ignored the position as it was on the evidence in July 1992. The position that Mr Gilroy described was a flux in which Mr Jordan was running down the business of Orion. The Tribunal had failed to draw a clear distinction of its findings between what had happened on the 17 July, on the redundancy of Mr Graham and Mr Russell, and what had happened subsequently.

We are unable to accept this point as constituting an error of law on the part of the Tribunal. The Tribunal were aware of the point, as is apparent from paragraph 9 of the decision. They stated their finding that the Applicants were employed immediately prior to the transfer. They stated in paragraph 8 that the transfer was in July 1992. That it is clear when one considers the date of the dismissal, in conjunction with the letter sent out to customers of Orion Print Services and Southlands Supply Services, stating that as from Monday the 20 July all future invoices would be issued by and payable to Southlands Print & Supply.

It is clear from the chronology that the Tribunal were entitled to infer, in absence of clear evidence to the contrary, that there had been a transfer at, or at about the same time as the contracts of employment were terminated. If that was so, the position would have been that Mr Graham and Mr Russell were employed immediately before the transfer. The third point made by Mr Gilroy was another way of putting the main point that he has made about a transfer. He said that it had not been established that the reason for the dismissal was the transfer, or a reason connected with it, within the meaning of Regulation 8(1). On this point he referred to the evidence about the poor state of Mr Jordan's finances. The difficulty with this argument is that there was a clear finding by the Tribunal that the reason for the dismissal was the transfer.

It is a finding that the Tribunal were entitled to make on the basis of the evidence. The Tribunal stated that the applicants were dismissed for a reason connected with the transfer by virtue of Regulation 8(1) and that those dismissals are consequently to be treated as unfair. As a matter of fact, the Tribunal did not accept Mr Jordan's evidence that the reason for the dismissal was some other reason than the transfer. The point is rejected.

The final main point made by Mr Gilroy was the one that has given us more concern than any of the others. That is a point raised under Regulation 8(2). Regulation 8(2) provides that where an economic, technical or organisational reason entailing changes in the workforce of either the transferor or the transferee before or after a relevant date is the reason or principal reason for dismissing an employee then under (a) paragraph (1) above shall not apply to his dismissal. That provision has to be read in the light of the decision of the House of Lords in the case of Listster v Fourth Dry Dock and Engineering [1989] IRLR 161. Mr Gilroy candidly accepted that the Notice of Appearance had not raised this point specifically, either by reference to Regulation 8(2) or in words that reflect that Regulation. He also accepted that it had not been raised specifically in submissions addressed to the Tribunal by his client. His point was that there was evidence given to the Tribunal about the financial circumstances of Mr Jordan which would be directly in point as an economic reason within Regulation 8(2).

There are passages in the notes of Mr Jordan's testimony, that he was advised by Solicitors when he explained the situation that he would end up being bankrupt. There was evidence given by Mr Graham, that their understanding of the position, was that Orion will shut down because of Mr Jordan's impending bankruptcy. He owed money to the Bank from a previous guarantee and the Bank were calling on it.

Mr Gilroy pointed out that Mr Jordan was unrepresented at the hearing and in those circumstances the Tribunal should have taken that into account, and considered the question of Regulation 8(2), even though it was not raised in terms in the Notice of Appearance or in the submissions. His summary of this point was that the evidence before the Tribunal provided a basis for the Regulation 8(2) defence. The error of law on the part of the Tribunal was a failure to consider that defence.

That is the only part of the case on which we have sought argument from Miss Simler, who appears for Mr Russell and Mr Graham. We accept her submissions as a complete answer to this point. She referred to a short passage in Lord Oliver's in the case of Litster at page 173 where the point was dealt with briefly at the end of his speech. It was said that the Respondents in that case had had an opportunity before the Industrial Tribunal of demonstrating, if they could, that there was some economic, technical or organisational reasons for the Appellants' dismissals. Lord Oliver said:

"They did not do so and I see no grounds now for allowing the question to be reopened".

It is true that the fact that the party is unrepresented may be a relevant factor in deciding whether to allow matter, which has not been specifically raised, to be re-opened at a later stage. This is not one of the cases where that should be allowed. We agree with Miss Simler that the submission made by Mr Gilroy on Regulation 8(2) is misconceived. The Tribunal stated in its decision that the Regulation 8(2) point had not been relied upon. If one examines the evidence, Miss Simler is right in her submission that no evidence was adduced by Orion or Southlands Print & Supply to establish the defence. She submitted, rightly, that the general evidence available of Mr Jordan's personal financial position and threatened bankruptcy was not linked, as it needed to be under the Regulation, to the necessity of reducing his workforce. The workforce included three non production staff who were retained and transferred, whereas four of the printing staff, including Mr Graham and Mr Russell, were dismissed. There was no evidence before the Tribunal to suggest that outside printers, or newly employed printers, were cheaper than Mr Graham and Mr Russell. There was no evidence to link their dismissals with an economic, technical or organisational reason which entailed those dismissals.

Mr Gilroy correctly accepted that the onus of bringing his clients within Regulation 8(2) was on him. They have failed to discharge it. We do not think, in all the circumstances, that this is a case in which Southlands Print & Supply should be allowed to raise a question which was not raised and have the matter remitted to an Industrial Tribunal for another hearing. They have had a full opportunity to demonstrate by evidence that this was a regulation 8(2) case. They have failed to adduce the evidence required for that defence.

For all those reasons we find against the Appellant. We thank both the Counsel for the helpful submissions, and the full and clear skeleton argument of Miss Simler which enabled us to appreciate the points which were going to be made on behalf of her client, without having to call upon her to make full oral submissions. For all these reasons this appeal will be dismissed.