United Kingdom Employment Appeal Tribunal

 


BAILII case number: [1994] UKEAT 805_94_1511

Appeal No. EAT/805/94

EMPLOYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 15 November 1994

Before

THE HONOURABLE MR JUSTICE MUMMERY (P)

MR E HAMMOND OBE

MR J C RAMSAY

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SPINDLER & HODGES LTD          APPELLANTS

MISS G E STOCK          RESPONDENT

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Transcript of Proceedings

JUDGMENT

PRELIMINARY HEARING

Revised


 


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APPEARANCES

For the Appellants Mr R W Aston

(Solicitor)

Aston's Employment Law Consultants

567 Love Lane

Pinner

Middx. HA5 3ey


 


MR JUSTICE MUMMERY (PRESIDENT): This Appeal is from a Decision of the Industrial Tribunal held at Croydon on the 29th April 1994.

The Decision was in Proceedings between Miss Stock and two Respondents, Mrs Storey and Mrs Rees, trading as a firm called Gateaux Galore, and the second Respondents, a company called Spindler & Hodges Limited.

For Full Reasons notified to the parties on 12th July 1994, the Tribunal unanimously decided that Miss Stock was made redundant by the second Respondent, Spindler & Hodges Limited, and that company was ordered to pay to the Applicant, a redundancy payment of £712.

Spindler & Hodges appeal against the Decision by Notice of Appeal dated 22nd August 1994. This is the Preliminary Hearing of the Appeal. The purpose of a Preliminary Hearing is to decide whether the Notice of Appeal raises an arguable question of law. At the hearing today Mr Aston appeared for Spindler & Hodges. He also appeared for them in the Industrial Tribunal and he argued that there was an arguable point of law on this appeal.

In order to decide whether there is, it is necessary to look at the background to the proceedings. Gateaux Galore, as the name of the firm suggests, carried on a confectionery baking business in which Miss Stock was employed as senior confectioner and baker. Her employment had started on the 5th June 1989. Her employment ended on the 5th November 1993.

Gateaux Galore started to experience financial difficulties in the middle of 1993. They were in difficulties with the landlords who were distraining for rent in respect of arrears for the premises occupied by Gateaux Galore. There was a substantial business, but it had been hit by the recession.

Mrs Storey and Mrs Rees, as proprietors, realised that they were not able to continue trading. They had discussions with a view to disposing of the company. They had negotiations and discussions from the beginning of November 1993 with a Mr Rhodes, who was promoter of Spindler & Hodges Limited.

The company was formed. On the 5th November, a document which is entitled "Heads of Agreement" was signed by Mr Rhodes on behalf of Spindler & Hodges and also by Mrs Storey and Mrs Rees. The document is important in the dispute. It states that it is "Heads of Agreement which record the basis of the agreement reached and payment of the first consideration set out below and are subject to formal written agreement to be signed between the parties as soon as possible."

The document contains a warranty by the sellers (that is Gateaux Galore) that the accounts and financial information provided by them was prepared with due diligence and that the buyer, Spindler & Hodges, has relied on that information. There is an agreement that Gateaux Galore will transfer title to the goodwill of the partnership, factory and office equipment, stationary, stock, debtors, balances and so on, along with the exclusive use of the trading name Gateaux Galore in succession to the sellers.

There was to be authority to transfer telephone numbers to the benefit of the buyer. Then, most of important of all, it was provided that consideration will be paid in two forms, first a lump sum of £777.96 exclusive of VAT to be paid on the date of the Heads of Agreement. Receipt of which was acknowledged by the seller. A second amount of consideration was 15% of the gross value of sales exclusive of VAT to existing customers of the seller for a period of three years from the date of the Agreement up to a maximum amount of £90,000.

Various other provisions are included, one dealing with the provision of assistance by the sellers with queries and enquiries received from existing customers of the business for a period of six months from the date of the document.

That Agreement was made. What then happened was that the staff of Gateaux Galore were told, in the afternoon of the 5th November, by Mr Rhodes that he was acquiring Gateaux Galore customer base. A meeting of staff was called for the 8th November. At that meeting, staff were given application forms for positions with the new company.

As for the Applicant, she was advised by Mr Rhodes that she had been dismissed along with other staff with effect from the 5th November, and applications could be made for jobs with his company with no guarantee as to hours of work, pay and so on, or they could opt for redundancy.

The Tribunal found as a fact that Mr Rhodes personally dismissed the Applicant, Miss Stock, on the 5th November. In those circumstances, a question arose as to whether Miss Stock could claim redundancy payment from either Gateaux Galore or Spindler & Hodges. As she was not given any redundancy payment by either of them, she started proceedings in the Industrial Tribunal by an Originating Application presented on the 27th January 1994.

Her case, as set out on the attached statement, was that Gateaux Galore had ceased trading, as a result of financial difficulty and Mr Martin Rhodes of Splindler & Hodges acquired the undertaking of Gateaux Galore. She referred to the meeting at which she opted for redundancy. She was paid outstanding wages, but no money in lieu of notice and no redundancy pay, and therefore she claimed redundancy pay and payment in lieu of notice. She stated that she had named both concerns as Respondents, because she was not certain where the liability lies. She made it clear that she was dismissed and only paid for one week by Mr Rhodes.

As far as Spindler & Hodges were concerned, their Notice of Appearance stated that Mr Stock was never employed by them and therefore they wanted to be removed from the proceedings. Then, as far as Gateaux Galore were concerned, their defence was that the business had been taken over by Spindler & Hodges. They set out the circumstances leading to the cessation of the business.

The position, therefore, was that, as far as Miss Stock was concerned, she had lost her job. She had been made redundant. She was faced with two Respondents, both of whom denied liability, one on the ground that they had transferred the undertaking and the other on the ground that they had never become the employer of the Applicant.

The Tribunal correctly directed themselves to the provisions of the Transfer of Undertakings Regulations. They did not find it necessary to refer in detail to the regulations. Their general effect is now well-known to Industrial Tribunals. The crucial provisions of the regulations are that, where there is a transfer of an undertaking from one person to another, it operates so as to transfer the employees' employment from the transferor to the transferee. The employment continues to have effect after the transfer as if originally made between the persons so employed and the transferee. That is the effect of Regulation 5. All the transferor's rights, hours, duties and liabilities in connection with contract of employment are transferred to the transferee. Anything which is done before the transfer is completed by or in relation the transfer or in respect of that contract, or a person employed in that undertaking or part of it, should be deemed to have been done by or in relation to the transferee.

The Regulations do not define what is a transfer of an undertaking, save to say that an undertaking includes any trade or business and save to say that the Regulations apply whether the transfer is effected by sale or by some other disposition. That is the effect of the definition of undertaking in Regulation 2 and the provision in relation to relevant transfers in Regulation 3(2).

The relevant question for the Tribunal was, was there a transfer of an undertaking? If there was, then the liability to make the redundancy payment passed to Spindler & Hodges Limited. The conclusions of the Tribunal were that the Heads of Agreement was a concluded agreement. They rejected the submission made by Mr Aston on behalf of Spindler & Hodges, that it was only an agreement to agree. The Tribunal said in paragraph 4:

"Consideration was paid, stock was taken, order that had been placed prior to the 5 November were taken over and executed by Spindler & Hodges. Spindler & Hodges who were unable to negotiate with the landlord to remain at the premises ........continued at their existing premises in Bracknell. The telephone numbers were changed and calls redirected to the [Spindler & Hodges numbers and customers were advised of the take over/merger" and all orders were received from customers of Gateaux Galore were serviced by the [Spindler & Hodges]."

The Tribunal concluded, in those circumstances, that there was a transfer of an undertaking. The Tribunal said in paragraph 7:

"Having considered all of the evidence [we] are satisfied that there was a transfer of undertaking whereby the business carried on by Gateaux Galore transferred to Spindler & Hodges.....The Tribunal are satisfied and find as a fact that there was a dismissal of the Applicant on 5 November 1993. The Tribunal are satisfied that the reason for dismissal was redundancy. Having found the Transfer of Undertaking Regulations apply [the Tribunal] find that the liability for payment of the redundancy payment is the responsibility of the [Spindler & Hodges] "

They then awarded her £712 calculated in a manner which is explained.

The argument of Mr Aston on this Preliminary hearing is that the Tribunal erred in law, or was perverse in its conclusions, as to the existence of a Transfer of an Undertaking, because the finding that there was a concluded agreement was not consistent with certain evidence put before the Tribunal.

The first piece of evidence was the County Court Summons which had been taken out by Gateaux Galore against Spindler & Hodges Limited claiming payment for goods provided to Spindler & Hodges. That summons refers to the provision of stocks and to the fact that a Trading Agreement was not concluded. The provision of stock was referred to as a preliminary step to the Trading Agreement with Spindler & Hodges which was not concluded.

That piece of evidence was before the Tribunal. In our view it is not conclusive of the matter, in the sense that Mr Aston submits. He submitted that that made it clear, that no agreement was ever entered into for the transfer of the business. That ignores the fact that the Heads of Agreement clearly provide for the transfer of a business and for the payment of consideration for it, the first part of which was paid.

He also referred to another document, a letter from the solicitors [that is Messrs Bradleys] he refers to an extract from that firm of solicitors letter of the 22nd November, saying to the Applicant:

"We would inform you that on the 5 November 1993 our clients provisionally agreed, subject to contract with the former partners of Gateaux Galore to purchase the name, goodwill and assets of that business."

The solicitors, Bradleys, were acting for Spindler & Hodges. On that aspect of the case, Mr Aston emphasises the word "provisional" and reference to "subject to contract" in support of his argument that there was no transfer of an undertaking.

Finally, Mr Aston referred to evidence given by Mr Rhodes for the company, in which he said that he had entered into discussions for a purchase of the business on the 2nd November. He agreed to pay the wages of the staff at the end of that week, which was the 5 November. That resulted in the Heads of Agreement being drawn up. The objective of the payment was to enable further inquiries to be made prior to actual purchase, particularly with regard to the accounts as a business.

That was also the objective of the Heads of Agreement being only what is described as a Provisional Agreement. He did not go on with the purchase because he was not able to acquire any assets, other than some stock, and the turnover was less than he had been led to believe. He said in evidence he had never used the name of Gateaux Galore, because he believed he could not do so until he had actually acquired the business. He never did.

That may have been the evidence of Mr Rhodes to the Tribunal, but the Tribunal nevertheless came to the conclusion, which we think they were entitled to come to on the documents we have seen, that the Heads of Agreement effected a transfer of the undertaking. whatever may have been the actual intentions of Mr Rhodes on behalf of Spindler & Hodges.

In conclusion, Mr Aston submitted that the Heads of the Agreement were entered into on this conditional basis and therefore could not effect a transfer of a business. It was simply a temporary measure, rather like that described in the case of Longdon and Paisley v Ferrari Ltd and in Kennedy International ltd IRLR [1994] page 157. It was simply a matter in negotiation. The result of the further inquiries in negotiations meant that the deal was not proceeded with. So the business or undertaking was never acquired or transferred.

The difficulty with those submissions is that the Tribunal made clear findings of fact in relation to the circumstances in which the Heads of Agreement was concluded. The terms of the Heads of Agreement document are quite clear. In our view, there was no error of law on the part of the Tribunal, in concluding from all the circumstances that there was a transfer of an undertaking that meant that the liability to pay redundancy payments to

Miss Stock passed to Spindler & Hodges Limited.

In our view, the Tribunal did not misinterpret the 1981 Regulations or misapply them to the facts found by them. On the documents we have seen, the Tribunal were entitled to come to a conclusion on the facts which they did. It is not possible to say that that is a perverse or impossible conclusion to reach.

In those circumstances, we are of the view that there is no arguable point of law raised on this Appeal and therefore it will be dismissed at this preliminary stage.