United Kingdom Employment Appeal Tribunal

BAILII case number: [1995] UKEAT 711_93_3103

Appeal No. EAT/711/93

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 31st March 1995

Before

THE HONOURABLE MR JUSTICE MUMMERY (P)

MRS M E SUNDERLAND JP

MR S M SPRINGER MBE

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COOLPIKE LTD T/A MOSAIC DESIGNS          APPELLANTS

(1) MRS C ATHILL

(2) SAIGAL BROTHERS          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellants MR G SAIGAL

(Lay Representative)

For the 1st Respondent MR B S MORRIS

(Union Representative)

The 2nd Respondents neither present nor represented


 


MR JUSTICE MUMMERY (PRESIDENT): This is an appeal from the Industrial Tribunal held at Leicester on 28th October 1992. The Tribunal heard a claim made by Mrs Cora Athill for a redundancy payment. She presented a complaint on the 22nd July 1992 against Saigal Brothers claiming that she had been employed as an overlocker from the 10th August 1988 until the 23rd June 1992. She said that she had worked for the Company since August 1988, although it had changed its name in October 1990. On 16th June 1992 she was given one weeks notice that she was redundant. She was not given any other notice or pay and no redundancy pay. She believed she was entitled to a further two weeks pay in lieu of notice plus redundancy pay. She mentioned that the name of Saigal Brothers had been changed to Mosaic Designs.

The response of the first respondent, Saigal Brothers, was to say that Mrs Athill was dismissed for lack of work. They accepted that her employment commenced in August 1988, but contended that she left the employment of Saigal Brothers in October 1990, and was paid in full when she left. There was no question of Saigal Brothers changing its name. It had continued in operation retaining its original name and status.

Coolpike Ltd T/A Mosaic Designs were added as a second Respondent. They put in a Notice of Appearance simply saying:

"Mrs Corah Athill had not worked for us long enough to be eligible for redundancy pay."

They said that the correct dates of her employment were from the 10th October 1990 until 23rd June 1992.

The Industrial Tribunal unaminously decided that Mrs Athill was entitled to a redundancy payment of £473.00 from the second Respondents, Coolpike Ltd T/A Mosaic Designs. They gave Summary Reasons with which we are not concerned, because Extended Reasons were sent to the parties on the 29th July 1993.

Coolpike Ltd were dissatisfied with the Decision and appealed by a Notice of Appeal served on the 28th August 1993. At the hearing of the Appeal Mr Saigal represented Coolpike Ltd. He made his submissions in person. Mr Morris represented Mrs Athill.

We can only interfere with the Decision of the Industrial Tribunal, made in Mrs Athill's favour, if it can be shown that it was reached as a result of an error of law. We cannot alter the facts. The facts were found by the Tribunal as follows. Mrs Athill did start employment, as an overlocker, on 10th August 1988. She gave evidence, which the Tribunal accepted, that on 10th October 1990 she was called into the office and asked to sign a new contract. She said that there was no consultation with Mr Saigal. She was just told by the office girl "sign this - a new contact". She received no redundancy payment. She went back to work and did precisely the same job as before. The next thing that happened, relevant to the case, is that on 16th June 1992, she received a letter making her redundant. She was paid one week's wages and her holiday pay.

More evidence, accepted by the Tribunal, was given by her about the circumstances in which she was asked to sign a new contract. She said that the contract was not explained to her. She did not read or understand what she had signed. She was told by the office girl, Mandy, that everybody had to sign a new contract. She was not given her P45. She did not then leave, but carried on as before.

The position, in the view of the Tribunal, was that she worked from August 1988 for Saigal Brothers, who are engaged in the manufacture of knitwear. She had a contract with them. On the 9th April 1990 the Respondent Coolpike Ltd was incorporated. Mr George Saigal of Saigal Brothers was not involved in that company, which traded as Mosaic Designs. The sole director of that company was Mr George Saigal's brother, David.

In 1990 the partnership between George Saigal and Philip Saigal was dissolved. The knitwear company was continued on a small scale. Machinery was purchased. The Tribunal referred to an agreement made between the Saigal brothers. We have been shown a copy of it. It is an agreement dated 24th March 1990. By that Saigal Brothers sold to Mosaic Designs, (that is, Coolpike Ltd), that plant and machinery detailed on an attached schedule. An agreement was reached about how the value of it would be determined. The sale would be affected by the 1st April 1991, by payment of quarterly instalments, to be completed by the 1st January 1992. The machinery would remain the property of Saigal Brothers until payment in full was received. Mosaic Designs, (Coolpike Ltd), would enter into a twenty year lease for the premises at 181 Humberstone Road, Leicester, at an initial rent of £30,000.00 with effect from the 13th February 1991. It was provided in clause 4:

"In consideration for Saigal Brothers permitting Mosaic Designs the use of the premises, cost free till 1st January 1991, Mosaic Designs make no charge for rent for the thirty six month period."[clause 5 is an important provision]

"Saigal Brothers will assist Mosaic Designs to secure employees but is not obliged to do so. Employment of any employee of Saigal will not count as continuous employment of that employee, i.e. no liability will pass."

"6. Mosaic Designs will not be held responsible for any debt incurred by Saigal Brothers nor Saigal Brothers any debt incurred by Mosaic Designs."

That was the agreement. The Tribunal then stated their decision on that evidence. It is important to see the precise terms in which they stated their conclusion. In paragraph 7, they said this:

"The Tribunal conclude that there was no transfer of the business in 1990 but there was, however, a change of employer which made no difference whatsoever to the applicant's terms and conditions of employment. By agreement between the first and second respondents [that is between Saigal Brothers and Coolpike Ltd] the employment of the applicant was in 1990, transferred from the first to the second respondent. Mr Saigal agrees that he did not dismiss the applicant in 1990 and there was, therefore, continuity of employment. The applicant states that she received no redundancy payment in 1990. We accept her evidence. This is evidence of continuity of employment."[They then continued in paragraph 8]

"Although the applicant signed document A3 on 10 October 1990 confirming receipt of that statement, [that was a contractual statement] we are satisfied that she did not appreciate what she was signing. Nor was the effect explained to her - she was merely told to sign "like everybody else" by the office girl. She has every reason to believe that she had continuity of employment and that she was entitled in 1992 to a Redundancy Payment based on 3 continuous years service. In our view paragraph 5 of R1 [that is the contractual term, saying that employment of any employee of Saigal will not count as continuous service of that employee] has not effect, because the first respondent did not dismiss the applicant in 1990. She had continuity of employment."[The Tribunal then said]

"9 In June 1992 the applicant was dismissed as redundant by the second respondent [by Coolpike Ltd] who did not appear at the hearing." [in the Industrial Tribunal]

It was clear that it was a dismissal by reason of redundancy, because it was admitted in the Notice of Appearance, and also in a letter, that dismissal was for lack of work. They computed the sum due as £473.00. They mentioned that they had not had the benefit of hearing from Coolpike Ltd, but they recommended that Saigal Brothers should contribute half of the redundancy payment ordered.

Mr Saigal asks us to reverse that decision. He pointed out in the Notice of Appeal that:

"The Tribunal concluded that there was no transfer of business in 1990 ..."

Mrs Athill had commenced employment with Coolpike on the 10th October 1990. She was dismissed on 16th June 1992. She was not able, therefore, to establish entitlement to redundancy pay and the Tribunal was wrong in holding that she had continuity of employment.

As to the statement that she had not received redundancy payment in 1990, that was said to be a matter for the previous employer, not for Coolpike.

In the Notice of Appeal, as in the oral submissions to us. Mr Saigal referred to a number of authorities. He referred in particular to Secretary of State for Employment -v- Globe Elastic Thread Company Ltd [1979] ICR 706 and he referred to the later case of Melon -v- Hector Powe Ltd [1981] 1 All England Reports 313. He referred to those cases for the proposition that, on a transfer of a business, the contract of employment comes to an end. That is so, even though:

"Individual employees [of the transfer or of the business] may continue to do the same work in the same environment ..."

He pointed out that there were legal decision to the effect that a contract of employment could not be assigned. There was no automatic transfer of employment. On the contrary:

" ... an employee's contract of employment automatically comes to an end on a change in the identity of the employer."

That summarises the main points. He said that the Tribunal erred in law in saying that there was here continuous employment. There was not, because there was a break, in October 1990 when Mrs Athill ceased to be employed by Saigal Brothers and became employed by Coolpike. She did not have a long enough period with Coolpike to entitle her to redundancy payments.

The difficulty with those arguments is that they completely ignore the effect of the Transfer of Undertakings (Protection of Employment) Regulations 1981 which were made on 14th December 1981. They are commonly referred to as "TUPE". The full name is "Transfer of Undertakings (Protection of Employment) Regulations 1981. The effect of those regulations, made pursuant to a European Community Directive, the Acquired Rights Directive, was to change the law as stated in the decision cited by Mr Saigal. The important change made in the law, with consequential detailed amendments, was that under Regulation 5 (1):

[The transfer of an] ..."undertaking or part [of an undertaking] "shall not operate so as to terminate the contract of employment of any person employed ... in the undertaking or part [of it. On the contrary, by] "any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee."

The position under the regulations is that, if there is a transfer of an undertaking, Mrs Athill's initial contract of employment with Saigal Brothers would, by virtue of the transfer, automatically go over to Coolpike Ltd, so that she would be able to add to her service with them, her previous service with Saigal Brothers. She would then be entitled to the redundancy payment.

On the facts found by the Tribunal, there is no doubt, in our view, that this was a case to which the Transfer of Undertakings (Protection of Employment) Regulations 1981 applied. The position was that there was an arrangement made between Saigal Brothers and Coolpike Ltd, under which the undertaking or, more precisely, part of the undertaking of Saigal Brothers, was transferred to Coolpike Ltd. This is demonstrated most vividly by the the facts found by the Tribunal; Mrs Athill went on working in October 1990 in exactly the same way as she had worked earlier. She went to the same premises, worked at the same machinery, did the same job on the same terms and conditions after the takeover by Coolpike Ltd as had been the position with Saigal Brothers. The only difference was that she signed a piece of paper, which was said to be "a new contract" with a new employer. That contract could not displace the effect of the Regulations, which give automatic protection of law to an employee in the circumstances in which they apply. Recent cases have made it clear that the 1981 Regulations can apply, even though there has been no transfer of ownership of a business, even though only a small number (even one employee) may be involved in a change of employment, in the context of the transfer of an undertaking. Those case are Dines and Others v. Initial Healthcare Services Ltd and Another [1995] ICR 11, Council of the Isles of Scilly v. Brintel Helicopters Ltd and Others [1995] ICR 249 and Kelman v. Care Contract Services Ltd and Another [1995] ICR 260. Those cases could not have been referred to the Industrial Tribunal, because they were decided later. The surprising feature of the decision is that it does not make any reference any where to the 1981 Regulations, and appears, in dealing with the question of a transfer, to make a self-contradictory statement. It said in paragraph 7:

"The Tribunal conclude that there was not transfer of the business in 1990 [and in the same sentence said] ... but there was, however, a change of employer which made no difference whatsoever to the applicant's terms and conditions of employment. "

The latter half of the sentence, taken in the context of all the facts found in the rest of the decision, contradicts the first half of the sentence. In our view, it is an error on the part of the tribunal to say that there was no transfer of the business in October 1990, if what was meant, was that there was no transfer of an undertaking for the purposes of the 1981 Regulations. But that error does not invalidate the decision. It is clear, on the facts set out in the Full Reasons, that this is a case which attracts the protection of the 1981 Regulations. In those circumstances, there is no error of law in the Tribunal holding that there was continuity of employment. There is no error of law in holding that, in consequence of the continuity of employment, Mrs Athill was entitled to the redundancy payment. We accept the concise and clear submission of Mr Morris, on behalf of Mrs Athill, that the Tribunal's decision was right, because, on the facts found by them and on the application of 1981 Regulations, the position was that there was no change of job by Mrs Athill, she was not dismissed in 1990, she did not resign in 1990. She was not given a P45 in 1990. She was not given one until June 1992 when she was made redundant. She was made redundant in circumstances that entitle her to the payment having regard to her previous service.

We therefore reject the submissions of Mr Saigal as based on a misapprehension that the cases decided before the 1981 Regulations continue to govern the situation. They do not. The law has been changed.

We are driven to comment on two further matters referred to us. In the course of the submissions, Mr Saigal referred us to a decision of the Industrial Tribunal held at Leicester under the same Chairman, but with different lay members. It appears that a hearing took place on 17th June and 27th October 1993 of a case brought by a Mr Varia against Coolpike Ltd. [45046/92]. The Tribunal unaminously decided that Mr Varia was not entitled to redundancy payment, because he had insufficient continuity of service with the Respondents. Full Reasons for that decision were notified on what we believe must be the 2nd March 1994, not the 2nd of March 1993, as recorded on page 8 of the decision. That is not the most surprising part of the decision. The most surprising point is that the Tribunal appear to be of the view in paragraph 15, that the matter could be decided before them without any reference at all to the 1981 Regulations. The Tribunal said this:

"15. Continuity of employment normally only applies to employment with a single employer. However, this is subject to three exceptions where employment with one employer can be carried forward and added to employment with a successor employer, namely where there has been a transfer of ownership of a business, where the two employers are "associated employers" and thirdly, where the transfer of employment is within a local education authority which is clearly not applicable in this case. If a change of employer does not fall within one of these recognised exceptions then there is not scope for the presumption of continuity of employment."

Reference is made in the next paragraph, in reaching the conclusion that there was no transfer of ownership of the business, to the case of Melon and others v. Hector Powe Limited [1981] 1 All England Reports 313 which was decided before the 1981 Regulations Law. The result of the case was that, not surprisingly, there were expressions of misgivings in paragraph 20. The result was that the applicant did not have continuity of employment. In addition he had not received any redundancy payment from his former employer, Saigal Brothers, by whom he had been employed for ten years, from 1981 to 1991. The surprising feature of the case is that the decision was reached without any reference in any part to 1981 Regulations. There appears to be a clear mis-direction of law in paragraph 15 of the decision, as to the circumstances in which continuity of employment can be claimed. A further feature of that decision is that, we were told by Mr Morris that in an earlier case brought by Mrs Middleton against Coolpike Ltd [41702/92], heard on the 26th January 1993, the Tribunal stated, for reasons notified to the parties on the 17th February 1993, that Mrs Middleton was continuously employed by Saigal Brothers, that the undertaking of Saigal Brothers was transferred to Mr David Saigal T/A Mosaic Designs in August 1990, and that the applicant continued to do the same work, at the same place until she was made redundant on 23rd June 1992. That was held on a Preliminary Hearing. On the basis of that ruling the Tribunal directed that the application should proceed to a Full Hearing. We have been told by Mr Morris that it has not proceeded to a Full Hearing, because a direction was given that that case should stay "on hold" until after this Appeal had been heard. We find it surprising, in those circumstances, that Mr Varia's case against Coolpike Ltd, the same Respondent, should have continued to a Full Hearing at which a decision was reached contradictory to the decision reached on the Preliminary Hearing in Mrs Middleton's case. In Mrs Middleton's case it was held that there was a transfer of employment, with resulting continuity. In Mr Varia's case, it was held that there was not. These are matters which, in our view, require full consideration in the Leicester Industrial Tribunal to see what went wrong. Something has gone wrong. It will have to be investigated.

For all those reasons the result of this appeal is that it is dismissed. Because there was no error of law in the decision which led the Tribunal to make an incorrect conclusion. Their decision was right.

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Following the decision dismissing the Appeal, an application has been made by Mr Morris on behalf of Mrs Athill for costs of the Appeal to be paid by Coolpike Ltd.

We have power to order costs and expenses under Rule 34, The Employment Appeal Tribunal Rules 1993:

"Where is appears to the Appeal Tribunal that any proceedings were unnecessary, improper or vexatious or that there has been unreasonable delay or other unreasonable conduct in bringing or conducting the proceedings ..."

Mr Morris makes the application under that rule. Mr Saigal said in answer to it that there was nothing vexatious about bringing this Appeal. He particularly pointed out the contradictory statements in paragraph 7 of Industrial Tribunal decision. In our view, this is not an appropriate case for ordering costs. The Industrial Tribunal decision did have unsatisfactory features. As we have explained in relation to the other decisions, it was made in a context where Coolpike Ltd were receiving contradictory decisions from different Tribunals. In those circumstances we did not think that it was unreasonable for Mr Saigal to bring Coolpike's case on this Appeal. It has enabled us to look at the other decisions. Coolpike Ltd have won one. They have lost two. There was something that had to be looked into, in order to examine what the true legal position is. That has now been clarified. The 1981 Regulations apply to these cases for the protection of the employees.

In those circumstances we do not exercise the power under Rule 34.