United Kingdom Employment Appeal Tribunal

BAILII case number: [1994] UKEAT 858_93_2305

Appeal No. EAT/858/93

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 23 May 1994

Judgment delivered on 6 October 1994

Before

THE HONOURABLE MR JUSTICE MORISON

MISS A MACKIE OBE

MRS P TURNER OBE

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MR R FARMER          APPELLANT

DANZAS (UK) LTD          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellant MR R DE MELLO

(Of Counsel)

Messrs Tyndallwoods & Millichip

(Solicitors)

1st Floor, Albany House

Hurst Street

China Town

Birmingham

B5 4BD

For the Respondents MR S J NEVILLE

(Of Counsel)

Messrs Cumberland Ellis

Peirs

Solicitors

Columbia House

69 Aldwych

London

WC2B 4RW


 


MR JUSTICE MORISON: This is an appeal against the unanimous decision of an Industrial Tribunal held at Birmingham and which was entered in the Register on September 14 1993,

By that Decision the Industrial Tribunal held that Mr Farmer, whom we shall hereafter call the appellant, did not have sufficient qualifying service to give the Industrial Tribunal jurisdiction to hear his complaint of unfair dismissal against his former employers Danzas UK Limited, whom we shall hereafter call the respondents.

The appellant was employed by his own company R & M Farmer Ltd [whom we shall hereafter call 'Farmer'] from July 13 1988 until 1 October 1991, on which date he commenced employment with the Respondents. On March 16 1992 he was dismissed. Unless he can establish that his service with Farmer is continuous with his service with the Respondents, he would have less than the requisite period of qualifying service, namely two years, to give the Industrial Tribunal jurisdiction to hear his complaint of unfair dismissal. The issue before the Tribunal was whether there had been a transfer of a trade or business or undertaking from Farmer to the Respondents within the meaning of paragraph 17 of Schedule 13 of the 1978 Act. If there had been, then the two periods of service would be continuous; otherwise, not.

The essential facts as they may be derived from the Industrial Tribunal's Decision may be shortly stated.

Farmer was engaged in the transport business. It leased lorries, insured and maintained them and employed drivers. The essence of Farmer's business was providing vehicles and drivers to the Respondents to enable them to provide a transport service, which they called Eurapid, to their customers. That was the business which the appellant had first started before he expanded and, in 1988, had incorporated Farmer, a company which he owned with his wife. There were no formal contracts between Farmer and the Respondents. Daily instructions to Farmer would be received from the Respondents; the Respondents were responsible for loading the goods onto Farmer's lorries. These lorries bore Farmer's name and also the Respondents' logo, and Farmer's drivers, who were provided with telephones in their cabs at the Respondents' request, were given instructions directly by the Respondents' employees. Farmer was paid according to agreed rates for particular consignments.

The appellant's wife was employed by Farmer as its administrator, for which she was paid a monthly wage. She also ran, apparently as a sideline, the organisation of trunk runs between Manchester and Southend, and some loading and warehousing.

The Eurapid business was directed from Castle Donnington, where the Respondents had office accommodation. Office facilities were provided to Farmer and it was from there that the appellant worked. Following a change in customs regulations, which permitted goods to be cleared otherwise than at ports of entry, Farmer became engaged in arranging customs clearance of goods at East Midlands Airport.

In 1992 the Respondents decided to move their Eurapid business from Castle Donnington to Coleshill where all other aspects of their business were administered, and where their fleet of 15 vehicles was based. There was a vacancy for someone to take up the position of terminal manager at Coleshill and the appellant's name was put forward. A meeting was arranged between the Respondents' managing director and the appellant, which was not intended to be a discussion about a transfer of Farmer's business to the respondents. A discussion took place, initially, about the new position, which the appellant agreed to accept. A discussion then took place about the Eurapid business which Farmer had been undertaking as a contractor for the respondents. The Respondents' managing director insisted that Farmer should cease to trade altogether. A discussion took place regarding the transfer of the leases on vehicles, and a broad agreement, but not a legally binding one, was reached between the parties. It was agreed that the radios, telephones and trailer owned by Farmer should be acquired by the Respondents and it was agreed that all the drivers formerly employed by Farmer should be offered employment by the Respondents.

Immediately after October 1 1992 the Respondents employed Farmer's drivers to drive Farmer's vehicles which were made available to the Respondents for their use, their subsequent disposal being a matter for agreement between the parties in the light of the leasing arrangements. The only difference between their work for Farmer and their work for the Respondents was that Farmer's logo had been erased from the sides of Farmer's vehicles. Initially, the drivers did the same Eurapid work which they had done whilst employed by Farmer. By January of the following year, most of Farmer's ex drivers had been integrated into the Respondents' business. As to Farmer's lorries, the leases were never assigned to the Respondents but allowed to lapse and most of them had been replaced by the end of 1992. However, the Respondents paid Farmer for their use.

The Industrial Tribunal held that they were satisfied that Farmer had a business or undertaking which was capable of being transferred [paragraph 23] and that the respondents were, on the facts, put into a position where they were able to carry on substantially the same activities as Farmer had [paragraph 28]; and that the respondents acquired a definable part of Farmer which was a going concern and which could be carried on without interruption. On the facts of the case they were satisfied that the absence of goodwill did not prevent there being a transfer [paragraph 29]. They then addressed themselves to the cases of Spijkers, Ny Molle Kro and Dr Sophie Redmond and to the arguments that were presented to them and concluded that because there was always an intention on the part of the Respondents to integrate the Farmer business into its own business, the Farmer business did not retain its identity and thus, there was no transfer within TUPE.

It seems to us that the integration of the new business into that of the 'transferee' does not prevent the Regulations from applying in circumstances when otherwise they would have done. It seems to us that the argument on behalf of the respondents distorts the true test which is to be applied.

We have recently given judgment in another case [Council of the Isles of Scilly v Brintel Helicopters Ltd and R Ellis and Others] and indicated our views as to the proper interpretation of the present state of the authorities on the question of transfers of undertakings. We adopt those guidelines and seek to apply them to this case.

There is nothing in any European decision to suggest that an economic entity ceases to retain its identity merely because the economic activity is subsumed into the transferee's business. Were such an argument to prevail it would emasculate the working of the Directive and TUPE. It is likely that every business will wish to integrate, where possible, any new business which has been acquired, so that there can be flexibility of work practices and economy of scale. In this case, after the transfer, the drivers did exactly what they had been doing before, using the same equipment as they had used in the past and they serviced the same customers. As at the date of transfer, the economic activity of Farmer was transferred across to the respondents: "the transferee could carry on the activities of the predecessor without interruption: the transferee was being put in a position where he was able to carry on substantially the same business as before." [paragraph 29].

It is possible to identify the work being done by the employees engaged in that business before and after the transfer. That is sufficient to satisfy the requirements of TUPE. Whether or not the transferee intended to integrate the acquired business into its own operation is neither here nor there. Immediately after the moment of transfer the economic activity was the same as it had been immediately before, and it retained its identity. That is the crucial moment; what happened later does not alter the position.

Accordingly, as it seems to us, the Industrial Tribunal misdirected themselves as to the true meaning of the European cases. We have great sympathy with them. Some of the European Court cases are difficult to apply. This case is, we think, a classic of its kind, where a party has sought to avoid the workings of the Regulations by taking the 'identity test' out of context. In our judgment, the Industrial Tribunal would have arrived at the correct conclusion, had they not been persuaded to depart from their better judgment by the persuasive, but misguided, argument presented to them on behalf of the Respondents.

In our judgment, on the facts as found by the Industrial Tribunal there was a transfer to which TUPE applied as a result o the transactions entered into in October. We therefore allow the appeal and direct that Mr Farmer's complaint of unfair dismissal should be heard and determined by an Industrial Tribunal as soon as is reasonably practicable.