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United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Beaman v Bonusteam Ltd & Anor [1995] UKEAT 10_94_0911 (9 November 1995)
URL: http://www.bailii.org/uk/cases/UKEAT/1995/10_94_0911.html
Cite as: [1995] UKEAT 10_94_911, [1995] UKEAT 10_94_0911
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At the Tribunal
THE HONOURABLE MR JUSTICE MUMMERY (P)
MR J R CROSBY
MR E HAMMOND OBE
(2) FRONTLINE ENTERPRISES LTD T/A FRONTLINE BUSES
JUDGMENT
Revised
APPEARANCES
For the Appellant MR D LOCK
(Of Counsel)
Messrs Manby & Steward
Solicitors
Mander House
Mander Centre
Wolverhampton
W.Midlands
WV1 3NG
For the 2nd Respondents MR K J O'DONOVAN
(Of Counsel)
Messrs Glaisyers
Solicitors
10 Rowchester Court
Printing House Street
Birmingham
B4 6DZ
MR JUSTICE MUMMERY (PRESIDENT): This appeal is brought by Mr Geoffrey Beaman against the decision of the Industrial Tribunal held at Birmingham on 29 September 1993. The Tribunal heard a claim by Mr Beaman for unfair dismissal. The claim was brought against two Respondents; Bonusteam Ltd., which did not enter an appearance and has taken no part in the proceedings before the Industrial Tribunal or on this appeal; and Frontline Enterprises Ltd T/A Frontline Buses, who are alleged by Mr Beaman to be the transferees of an undertaking from Bonusteam Ltd.
In the full reasons notified to the parties on 26 November 1993, the Tribunal unanimously decided that Mr Beaman, who was formerly employed by Bonusteam as a Traffic Manager and Driver, had been unfairly dismissed by Bonusteam. That company was ordered to pay him the sum of £10,922.50. The Tribunal unanimously dismissed Mr Beaman's application against Frontline Enterprises on the basis that it had not been established that there was a transfer of undertakings to them for the purposes of the 1981 Regulations. Mr Beaman was dissatisfied with the result. We understand from his Counsel, Mr Lock, that Bonusteam is a shell company, and that he has not been paid any of the compensation which that company was ordered to pay him. He therefore pursued this appeal. His Notice of Appeal was served on 6 January 1994. His case is that the Tribunal erred in law in rejecting his contention that there was a transfer of an undertaking, and that no reasonable Tribunal, properly directing itself to the facts and the law, could have reached the conclusion that there was no transfer of an undertaking within the meaning of the 1981 Regulations.
The appeal has been well argued on each side by Mr Lock for Mr Beaman, and by Mr 0'Donovan for Frontline Enterprises. We are grateful to them for their clear, concise arguments. The conclusion we have reached is that this appeal should be allowed and it should be declared that, for the purpose of the 1981 Regulations, there was a transfer of an undertaking by Bonusteam to Frontline Enterprises in December 1992 and January 1993.
In order to understand the rival arguments, we must first fill in some of the background. Mr Beaman's case is set out in his Originating Application to the Tribunal on 10 March 1993. Most of the facts alleged were not in dispute at the hearing before the Industrial Tribunal. He traced the history of a business set up by him and the subsequent changes from the middle of June 1989 until the end of December 1992. He claimed that he was unfairly dismissed from his position as a Traffic Manager and that the liability for unfair dismissal was transferred on a transfer of the undertaking of Bonusteam to Frontline Buses. No Notice of Appearance was entered by Bonusteam. Frontline Enterprises, in their Notice of Appearance dated 5 May 1993, said:
"1. The Applicant at no time was ever in the employ of the Second Respondent. The Second Respondent at no time dismissed the Applicant.
2. The Applicant was dismissed by the First Respondent who is liable to the Applicant.
3. The Second Respondent thereby denies all liability to the Applicant."
There could not be a simpler line of defence. In support of that they could point to the one additional document in the case that we have been asked to read. That is the letter of dismissal dated 9 December 1992. The letter was sent on behalf of Bonusteam by its Managing Director Mr Stephen Morris, and addressed to Mr Beaman as Traffic Manager (Coaching) Bonusteam Limited. The headed notepaper refers to the name under which Bonusteam was at that time carrying on business: J.G.B.Travel, 20 to 53 Seaters, Bus and Coach Hire, Steetley Industrial Estate, Bean Road, Coseley, West Midlands. The telephone number is also given. The letter says:
"Dear Mr.Beaman,
As you are aware, I have attended a lengthy meeting with Alan Hodnett, the major shareholder in Bonusteam Limited.
It has been decided that in 1993, we intend to develop Bonusteam Limited into a stage carriage operation.
You will be aware of the implications on staffing that such a change will bring about, and I must inform you that your post of Traffic Manager (Coaching) will be redundant from Saturday 12th. December 1992.
It is felt that given your close association with the business for the past few years, it would be inappropriate to offer you continued employment in another capacity within our organisation, as this would lead to a greater personality clash than already exists.
You will of course receive one weeks pay in lieu of notice together with your P45. I would be grateful if you would forward your keys (and those of your daughter Donna) to these premises as soon as possible."
The letter of dismissal was not written by Frontline. It was written by Bonusteam to their employee. So, how are Frontline Enterprises legally liable? That was the crucial issue for the decision of the Tribunal. Were Frontline Enterprises legally liable to Mr Beaman who had been dismissed by Bonusteam and not by them, and who had been employed by Bonusteam, not by them? The facts of the case are set out in detail in the decision. We have had the benefit of the Chairman's Notes of Evidence. We have been referred to them in order to show how certain relevant facts, not referred to in the decision, were given in evidence.
The factual position is this: before 31 March 1989, Mr Beaman ran a transport business based in Sedgeley, W.Midlands; it was centred on the Wolverhampton area. The business was carried on under the name J G B Travel. That business was acquired by another company, called Burman Travel Limited, in 1989. Burman Travel was owned by Mr Hodnett and Mr Davies. Mr Beaman became employed as Traffic Manager of Burman Travel Ltd. The business of Burman Travel Ltd., was based in Tamworth, about 20 miles away from Sedgeley. After the takeover in June 1992, the J G B Travel component of Burman Travel Ltd., was transferred to Bonusteam Ltd. Bonusteam was in the business of providing coaches for private hire; about 75% of its business was concerned with that. Local authority work was about 25%. Bonusteam Ltd. was owned by Mr Hodnett and Mr Davies. Mr Hodnett had 60% of the shares, Mr Davies 40%. Bonusteam operated from the premises in Coseley, in the Black Country, and served that area, taking in Wolverhampton, Dudley, and Sandwell. In August 1992 Mr Morris became the Managing Director of Bonusteam.
In May 1992, Frontline Enterprises was formed. That is owned 60% by Mr Hodnett, 20% by Mr Davies and 20% by Mr Butterworth. It began trading at the beginning of September 1992. It was based in Tamworth. Between November and December 1992 there were discussions with Mr Beaman concerning the future of Bonusteam and Mr Beaman's own position. The letter of 9 December was written to him by Mr Morris on Bonusteam notepaper, informing him of his redundancy from 12 December. There followed certain transactions which are important on the question of whether there has been a transfer of an undertaking.
The position is that four coaches, which had been leased by Bonusteam from another company owned by Mr Hodnett and Mr Davies, U F C Limited, were transferred back to U F C Ltd., and then leased by them to Frontline Enterprises. Six operators' licences held by Bonusteam were surrendered. Licences were granted to Frontline Enterprises. Some office equipment was transferred, though not of much value. The telephone number of Bonusteam was transferred. Four employees of the seven employees of Bonusteam, including the Managing Director, Mr Morris, became employees of Frontline Enterprises. Mr Beaman did not, for the reasons already stated.
The point highlighted on the facts by Mr Lock, as indicating that Frontline is the successor company and transferee, is that both companies were operating bus and coach services in the Midlands. They both undertook private hire work, though in different percentages. Whereas 75% of Bonusteam's work was private hire, only 25% of Frontline Enterprises work was private hire. They both undertook local authority work; 25% in the case of Bonusteam: as far as Frontline Enterprises were concerned, they took over from Burman Travel Ltd., (which had ceased business) a coach business that involved 75% stage coach work. He highlighted the fact that there were four common employees transferred to Frontline Enterprises from Bonusteam, as well as furniture and office equipment. He submitted that they were in fact operating, using the same local authority bus and coach licences, as surrendered by Bonusteam and taken up by Frontline Enterprises. They had effective use of the same telephone number which represented substantial accumulated good will. They used at least four specific vehicles which were transferred through the associated intermediary, U F C Ltd., from Bonusteam to Frontline Enterprises.
On those facts, either set out in the Decision or uncontradicted facts in the Notes of Evidence, Mr Lock submitted that there was a transfer of an undertaking, and that the Tribunal's decision to the contrary was wrong. His argument involves going back to the general principles. He referred to two authorities. First, the decision of the European Court of Justice in Schmidt v Spar [1994] IRLR 302, paragraphs 16 and 17 in the judgment on page 304. He also referred to the decision of this Tribunal in Council of the Isles of Scilly v Brintell Helicopters [1995] IRLR 6 paragraphs 17-25. It is not necessary to repeat what is said in those cases. Mr Lock's submission is that the only proper conclusion that can be reached, on the facts in the Tribunal decision and in the Notes of Evidence, is that there was a transfer of an undertaking. Looking at the position of the coaches, operators licences, office equipment, telephone and the common employees, Frontline Enterprises after December 1992 and January 1993, were in fact carrying on activities previously carried on by Bonusteam. Mr Beaman was employed in those activities. Those activities amounted to an undertaking within the meaning of the Regulations. The continuation of those activities by Frontline Enterprises meant that there was a transfer in which Mr Beaman's employment was protected, and in which any liabilities to him, such as those for unfair dismissal by Bonusteam, were carried over by the Regulations to Frontline Enterprises.
He submitted that the Tribunal made a wrong decision. They erred in a number of respects. They decided that running stage coach services, such as was done by Frontline Enterprises, were so different an activity, that the business of Bonusteam, which was predominantly private hire, lost its identity. He argued that, on a proper analysis, Frontline Enterprises were engaged in using the same coaches, staff and other assets, to run a coach business. It was not the same activity as Bonusteam's, but it was similar. That is all that is required by the principles laid down in Schmidt and the Isles of Scilly cases.
He said that the Tribunal had failed to give weight to the fact that the decision to change to stage coaches was taken by the owners before the transfer, or to the fact that the same individuals, Mr Hodnett and Mr Davies, were behind both the transferor and the transferee. He placed particular emphasis on the fact that the Tribunal had failed to place any reliance on the diversion of goodwill caused by the diversion of the telephone number of Bonusteam to Frontline Enterprises. He said that that was only consistent with the transfer of the goodwill associated with an undertaking. The Tribunal had failed to give weight to the common factors between the businesses. As a matter of law, the result achieved by the Tribunal and the approach taken by them, conflicted with the approach appearing from the two cases cited. He pointed out that, if an employer decided to operate the same type of business, for example running buses and coaches in a slightly different way or for different customers, he should not be entitled, by using a series of corporate shells, to select which employees are transferred to the new business and to deprive remaining employees of all effective employment protection rights. Finally, he said that, if there was a transfer, Mr Beaman was dismissed for a reason connected with it and liability for any unfair dismissal by Bonusteam transferred from that company to Frontline Enterprises.
He pointed to particular parts of the decision to show that the Tribunal had approached the matter in the wrong way. The particular passage which he submitted revealed the erroneous approach of the Tribunal to the question is contained in paragraph 9, where the Tribunal said:
"... We are satisfied that there was an economic entity capable of being transferred, but that was centred on and served the Wolverhampton area."...
The Tribunal asked, was that entity transferred as a going concern? Did the economic entity continue to exist subsequent to the alleged transfer? They had taken a too restricted approach. They had failed to ask whether the activities continued were similar. They appear to have regarded it as a requirement that they should be the same. They could not be the same, because Bonusteam had been serving one particular geographical area and that would not be served by Frontline Enterprises. He also made other detailed criticisms of the reasoning of the Tribunal and its conclusions, in paragraphs 8, 9 and 10 of the decision.
Mr O'Donovan defended the decision. His essential point was that, although there might be some confusion in the reasoning in paragraphs 8, 9 and 10 of the decision, and although there might be a failure by the Tribunal to address certain matters in the evidence, they had come to a conclusion by looking at the important parts of the evidence and by addressing the right legal considerations. This Tribunal is not entitled simply to substitute its own view, whether there was a transfer of an undertaking or not, simply because it disagreed with the Industrial Tribunal's interpretation of the facts. He said that the Industrial Tribunal directed itself correctly to the issues whether, in December 1992, there was an economic entity in existence, capable of being transferred and whether a transfer did in fact occur. He referred to the detailed facts and said that their conclusions were ones which they were entitled to reach on those facts.
He accepted that they had not made express reference to the redirection of telephone calls, but it was not correct to infer that a Tribunal had failed to address a particular point, merely because it was not expressly dealt with in the decision. There was evidence before the Tribunal that the telephone line was redirected as a service to Bonusteam's former customers and that it was not a goodwill resource that produced business for Frontline Enterprises. The evidence, as revealed in the Notes, was consistent with the Tribunal's conclusions. In brief, they had reached a decision, permissible as an interpretation of the facts and the law. We should not interfere with it.
We agree with the submissions made by Mr Lock. The Tribunal, when it decided this case in September 1993, did not have the benefit of the fuller exposition of the law related to the transfer of undertakings contained in the decision of the European Court of Justice in Schmidt or in the decisions of this Tribunal and of the Court of Appeal, in such cases as the Council of the Isles of Scilly. In our view, Mr Lock is right when he says that the Tribunal's major error of law was in its narrow definition of the economic activities of Bonusteam. What they did, by confining them geographically and asking whether that entity continued to exist, was to apply the law incorrectly. We make no criticism of the Tribunal. If they had had the benefit of the guidance contained in the later cases, they would, in our view, have seen this case differently. Our overall conclusion is that, on a proper appreciation of the relevant facts in the decision and in the Notes of Evidence, and on a proper understanding of the Transfer of Undertakings Regulations, the only decision that could properly be reached by an Industrial Tribunal is that there was a transfer of an undertaking. We do not have any regret in reaching this decision. If this result were not the legally correct answer, the unacceptable position would exist, under which a number of companies, controlled by the same individuals, would have allowed Mr Beaman to succeed (without contest) in a claim against one company and then deprive him of the benefit of a claim against another company, a transferee controlled by them.
Mr Beaman's uncontested victory against Bonusteam should, by operation of the Transfer of Undertakings Regulations, be something that he should be able to enforce against Bonusteam, which is carrying on substantially similar activities to those previously carried on by his previous employers. For all those reasons the appeal is allowed. There is no need to remit this case to the Industrial Tribunal. All the relevant facts are in the Notes of Evidence and the decision. On that basis, we will make a declaration that the liability for unfair dismissal to Mr Beaman has passed, by way of transfer of undertaking, to Frontline Enterprises.