United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR WIGNALL (of Counsel) Messrs Bruce, Lance & Co Solicitors 87 Easton Street High Wycombe Buckinghamshire HP11 1NF
For the Respondents	MR VICKERY (of Counsel) Messrs B P Collins & Co Solicitors Collins House 32-38 Station Road Gerrards Cross Buckinghamshire SL9 8EL


 


LORD JOHNSTON: In this appeal the appellant seeks to overturn a finding by the Industrial Tribunal sitting in Reading dated 21st August 1995 where the appellant was held to have been fairly dismissed from his employment with the first respondents, and not entitled to any claim against the second respondents under the Transfer of Undertaking Regulations 1981.

The background to the matter can be taken from a very useful chronology submitted to us by Counsel for the appellant. Briefly, on or about 11th July 1994 it became apparent that the first respondents were in serious financial difficulties to the extent that they were probably insolvent, and a firm of accountants Haines Watts were employed to provide a report for the Board. That report was submitted to the Board in a draft on 14th July, and apparently the appellant was aware of its contents, there being at least a suggestion that the report recommended the appellant for redundancy and that he was aware of that fact, though this is not entirely clear. Thereafter the report was considered by the respondent's Managing Director who consulted his bank, and in due course on 22nd July a receiver was appointed. It was maintained upon the facts, that by this stage a decision had already been taken to dismiss the appellant. On 26th July two directors of the company started consultation with the view to purchasing the company by means of a new company involving themselves. On 27th July, the appellant and one other were made redundant at 5 p.m. and left the premises. Thereafter the Managing Director held a meeting with the rest of the staff declaring them all to be redundant, but that there were hopes of the business being saved. The evidence would suggest that at this stage in the process the appellant and his colleague who had also been dismissed were unaware of the proposals for the rest of the staff. After sundry negotiations an agreement was reached with the receiver whereby the company was purchased, and the staff, less the four persons originally identified in the Haines Watt report including the appellant were re-employed.

The substance of the complaints in the submissions of Counsel on behalf of the appellant was that the majority the tribunal having held that his dismissal arose principally by reason of the transfer to the new company and the evidence revealing that the dismissal was an economic one amounting to redundancy, he should have been consulted, not least because of the time scale between the preparation of the accountant's report and his actual dismissal which gave ample opportunity for such consultations to have take place. In this context, there was a cross-appeal on behalf of the second respondent as transferee, that the minority of the tribunal who held that the dismissal in question was for uneconomic reasons unconnected with the transfer was correct, and accordingly the second respondent should not be involved in any claims on behalf of the present appellant.

It has to be noted that it is not entirely clear what these claims now are, since the contractual claims originally contended for have been departed from. But as will be seen that is nothing to the point.

Against that background, the decision of the tribunal can be found in paragraph 4 of their extended reasons:

"4 Applying the law to those facts we reach the following conclusions:-

(a) There was a "relevant transfer as conceded and already mentioned, pursuant to the Regulations.

(b) The majority of the Tribunal are satisfied that the applicants have proved that the transfer, or a reason connected with it, was the reason or a principle reason for their dismissal. It could hardly be said, within the timescale of the evidence we have set out above, that the transfer was merely a "twinkle in the eye" at the date of dismissal. Whilst the applicants' representative did not explore in cross-examination whether the four redundancies envisaged in the accountant's report of 15 July 1994 were in fact those that occurred, from the terms of page 34 of the bundle R1, this seems probable; and although there is insufficient evidence to substantiate an allegation of collusion between the Receivers and Mr Collinson Jones or others, that is not required to reach such a finding. The majority draw attention to and rely on the terms of the letter dated 28 July 1994 (pages 31/33) from t he Receivers to Mr Collinson Jones, which letter was written within 24 hours of the dismissal of all Micro-Systems' staff and which i) refers to numerous recent telephone calls to Mr Collinson Jones, apparently concerning the proposed purchase of some/all Micro-Systems' assets and ii) makes plain the settled intention to "take on" all Micro-Systems employees, save the four planned redundancies, including the two applicants. In the circumstances, the majority of the Tribunal are satisfied that the transfer to Adnet was at least the principal reason for the dismissal of the applicants.

(c) The minority view is that the applicants have failed to prove that the transfer to Adnet was the reason, or the principal reason, for the applicants' dismissal. On the minority view, all concerned, including the applicants, appreciated that in any event redundancies, particularly of non-essential staff, would be required; and that pay cuts or re-organisation of staff alone would not suffice to take Micro-Systems' financial problems. That the applicants' roles were non-essential and that they were not replaced was demonstrated by Mr Bartlett in his evidence. On the minority view, the applicants' redundancies were by reason of the Receiver's belief that continued trading would only serve to aggravate the already perilous financial position and that therefore the applicants' claim against Adnet fails.

(d) On the majority decision therefore, and in accordance with the House of Lords decision in Litster, the applicants were employed by Micro-Systems immediately before their dismissal and their dismissals were automatically unfair unless Adnet establishes that an ETO reason was the reason or a principle reason for termination,

(e) In that event, Adnet contended that the reason for dismissal was economic. The majority of the Tribunal accepted that submission, adapting where necessary the reasons and accepting the evidence which led the member in the minority to conclude that dismissal was not connected with the transfer.

(f) The majority therefore consider that the applicants' dismissal was by reason of redundancy, which is a potentially fair reason within Section 57(3) of the Employment Protection (Consolidation) Act 1978 and that whilst under Regulation 5(2), liability, if established, would pass to Adnet, redundancy was a sufficient reason for dismissal in the circumstances and that Adnet acted reasonably in selecting the applicants for dismissal. It was common ground between the parties that redundancies were practically inevitable and whilst no formal consultation took place or objective selection criteria were established, they could have made no difference and in the context of trying to revive a failing business were not essential. Micro-Systems was a small concern with only 14 employees, including Directors, most with specialist roles and skills. Mr Warner, as the Company Accountant, has not been replaced and his duties are now carried out within Adnet via an existing staff member over part of one day every week. Mr Woodford as Sales Manager supervised three sales people and has not been replaced; his duties being undertaken by Mr Collinson Jones in addition to his own.

(g) In the circumstances, it is the view of the majority that Adnet acted fairly and reasonably and with sufficient reason in dismissing the applicants for redundancy and their claims against Adnet will therefore fail and are dismissed."

On the issues of consultation, Counsel relied strongly on De Grasse v Stockwell Tools Limited [1992] IRLR 269, Heron v Citylink - Nottingham [1994] IRLR 264 to buttress the proposition that consultation was an essential part of redundancy process, and it was only in the most rare case that the failure to consult would still result in a dismissal for redundancy being fair. This proposition was against the background of the well-known case of Polkey v A E Dayton Services Ltd [1987] IRLR 503, which in turn must be looked at against the dicta of Balcombe LJ in Duffy v Yeomans & Partners Ltd [1994] IRLR 642, where at paragraph 14 on page 645 the learned judge says:

"It is what the employer (as a reasonable employer) could have done which is required to be tested; so that tribunal must ask whether an employer, acting reasonably, could have failed to consult in the given circumstances."

This latter dictum was relied upon by Counsel for the respondents to support his submission that the true situation here was a general redundancy affecting all employees, even if the way in which the appellant and his colleagues had been treated differed in fact from the rest. At the end of the day all employees were going to be dismissed by reason of redundancy, and accordingly applying the test, no reasonable employer would have been required to consult, upon the basis that it would have not made any difference to the result.

On the question of transfer, the issue he maintained was one which yielded only one conclusion; namely that, the dismissal of the appellant was not sufficiently causatively connected with the transfer, neither in fact or time for it to be a relevant transfer within the meaning of the Regulations. He referred to Spink v Express Foods Group Ltd [1990] IRLR 320 and Ibex Trading v Walton [1994] IRLR 564. In reply in this context, Counsel for the appellant referred to the well-known case of P Bork International A/S v Foreningen Af Arbejdseledere I Danmark [1989] IRLR 41. Both sides in this context also referred to the well-known case of Litster & Others v Forth Dry Dock & Engineering Co Ltd [1989] ICR 341.

It is obvious that the two questions raised in this appeal and cross-appeal are inter-connected and depend to some extent upon the resolution of the same factual issues. However, the question of whether or not in a particular case a dismissal is causally connected with a transfer of the undertaking within the meaning of the Regulations, must always be a question of fact. When it is closely related in time and obvious cause, i.e., by either the transferor or transferee in an agreed transfer situation in a context that the work force must be reduced such can be regarded as one side of the spectrum, the rationalisation of a business prior to any transfer being even contemplated to any particular individual in order to make it less loss-making or more attractive being the other side. Within that spectrum therefore there is a grey area where the transferor may well have a transfer in mind when he reduced his work force, but may nevertheless be doing it for general rationalisation or economic reasons not sufficiently connected in time nor cause to be relevant to an impending transfer which may be on the horizon. There is a real question in this case as to whether the circumstances do not fall within that grey area, but we have come to the view without much hesitation that the matter being one of fact, the majority of the tribunal were entitled to reach the view that they do so state, certainly to the extent that their decision cannot be regarded as perverse. From an early stage of the process set out in the chronology, the Managing Director of the first respondents had the clear intention of trying to make the company attractive to a potential transferee which he himself had in mind, and while the view of the minority is equally one that the majority could have achieved, we cannot say that they were bound so to do upon the evidence. The limited ground, therefore, that the reasoning given which we have quoted in this context by the tribunal can support its conclusion makes it one which it was entitled to reach and with which we will not interfere.

We turn now to deal with the question of the fairness of the dismissal in the context of it being for a reason connected with a transfer in terms of Regulation 8(1) of the Transfer of Undertaking Regulations 1981 (as amended) which renders the dismissal automatically unfair unless subsection (2) of the Regulation applies, viz. the reason was economic, technical or organisational.

A number of observations have immediately to be made. In the first place the evidence reveals that the appellant and his three colleagues were certainly treated differently in the run up to their dismissal from the rest of work force. They appear to have been identified in the report and dismissed without consultation prior to any such indications as to the rest of the work force was given to them as to their fate. Secondly, the new constituted enterprise has taken all the staff of the company on except the four identified in the accountant's report or to have not been replaced, prima facie an apparent redundancy situation, not in itself constituting unfairness as in such, and a valid reason for dismissal provided the proper procedures are followed, and that is where the shoe pinches in this particular case.

For the reasons which the tribunal have given and which we have already quoted, the particular reason can be regarded as economic upon the evidence, thus introducing sub-paragraph (2) of Regulation 8, and such in turn has been and can be equiperated to redundancy. (Meikle v McPhail (Charleston Arms) [1983] IRLR 351).

Finally, it has to be observed that the reasoning of the tribunal in sub-paragraph (g) on page of its decision has to be generously read if it can be supported. There is a plain error in the reference to Adnet as the dismissing party, since it was plainly the receiver who has to be regarded in the context of the Duffy test as the employer. With considerable hesitation, we have come to the conclusion that the tribunal were not so much seeking to subvent the decision of the receiver in the context with their own view, but rather were asserting that a reasonable employer would have not regarded the process of consultation in the actual context of this company's position at the time as capable of achieving anything. This case must be regarded as very special since there are very few in which a possible successful outcome of a consultation in favour of the employee cannot be envisaged, but in this case, it is plain that there was no other employment to offer him within the organisation, nor, given the accountant's report, was the employer or the receiver likely to be dissuaded from following its terms. In these wholly exceptional circumstances, we are therefore prepared to support what we consider to be the decision of the tribunal, namely that the consultation process would have been futile applying the test of what a reasonable employer could be expected to do. Put simply, the evidence before the tribunal and acceptable to it, makes it clear that the appellant was going to lose his job and no amount of consultation would have made any difference.

We reach this decision with regret, since we have little doubt that the appellant is entitled to feel aggrieved at the way he was treated. But the consultation process must have at least an identifiable practicable consequence which will effect the issue of dismissal or selection for redundancy, and we cannot divine any from the unfortunate facts of this case.

For these reasons, the appeal will be dismissed.