United Kingdom Employment Appeal Tribunal

BAILII case number: [1996] UKEAT 218_95_1503

Appeal No. EAT/218/95

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 15 March 1996

MR JUSTICE HOLLAND

MR R H PHIPPS

MR R SANDERSON

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DURATUBE LIMITED          APPELLANTS

MR P S BHATTI AND OTHERS          RESPONDENTS

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Transcript of Proceedings

JUDGMENT

Revised


 


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APPEARANCES

For the Appellants MR A HILLIER

(Of Counsel)

Messrs Baileys Shaw & Gillett

Solicitors

17 Queen Square

London WC1N 3RH

For the Respondents MR M SHRIMPTON

(Of Counsel)

Messrs Conway & Co

Solicitors

109 High Street

Wealdstone

Harrow

Middlesex HA3 5DL


 


MR JUSTICE HOLLAND: We have before us an appeal by Duratube Limited from a decision of an Industrial Tribunal held at London (North), which decision was communicated to the parties by way of extended reasons dated 26 January 1995. The issue before that Tribunal arose out of the following chronology.

On 13 August 1991, Duratube and Wire Limited went into receivership. At that time the Applicants before the Industrial Tribunal (some eighteen in number) were employees of that company, seemingly of some standing. Mr Mike Blake was appointed the Administrative Receiver by a bank.

On 15 August 1991, Mr Blake as Receiver, dismissed the Applicants amongst other employees, purportedly on the grounds of redundancy. Certain other employees were retained so as to leave a core body of essential workers for the completion of the Middle East contract. On 16 August 1991, an advertisement appeared in the Financial Times, caused to be there by Mr Blake, which advertisement put up the business for sale. On 9 September 1991, interest in purchase was evinced by a company Oasis International Trading Limited. On 11 September an offer was received from that company which proved to be good. The result was that on 24 September 1991 the company was sold to Alnery 1103 Limited. That latter company subsequently had its name changed to Duratube Limited, that is, the Respondents to the application.

Central to the issue before the Industrial Tribunal was Regulation 8(1) Transfer of Undertakings (Protection of Employment) Regulations 1981. That sub regulation reads:

"Where either before or after a relevant transfer any employee of the transferor or transferee is dismissed, that employee shall be treated for the purposes of Part 5 of the 1978 Act and Articles 20-41 of the 1976 Order (unfair dismissal) as unfairly dismissed if the transfer or reason connected with it, is the reason or principal reason for his dismissal."

The issue before that Industrial Tribunal was described in its own opening words as follows:

"1. This is a hearing to decide whether in the circumstances set out in this decision, the Applicants succeed in establishing that the transfer which occurred in this case was the reason or the principal reason for the Applicants' dismissal."

In the event the unanimous decision of the Tribunal was:

"... that the Applicants establish that the transfer was a reason or principal reason for the Applicants' dismissal."

It is against that decision that Duratube, as the original Respondents, the present Appellants, appeal.

In presenting the appeal, Mr Hillier has submitted that resolution of the issue before the Industrial Tribunal was a two-stage process. We agree. By stage one, what that Tribunal had to resolve was the following issue. What was the reason for the Applicants' dismissal? Or, if there was more than reason, what was the principal reason? In formulating that first stage in those terms, specific reference is made to the terminology of Section 57(1) Employment Protection (Consolidation) Act 1978; that is, one of the constituent sections Part 5 of that Act. That reference is made, because we accept Mr Hillier's submission that there is plainly a relationship between the drafting of this sub regulation and the very familiar terms of that provision, that is a fundamental element of the legislation as to unfair dismissal. Stage two raises this second issue. Was that reason or that principal reason "a relevant transfer" that proceeded or succeeded the dismissal, that is "the transfer" or a reason connected with such transfer? Mr Hillier submits and again we agree, that stage one as thus defined is a pure question of fact. Stage two is likewise one of fact, albeit that there is some guidance available as to a Tribunal's approach to it from a number of reported cases.

Mr Hillier further submits that this Tribunal failed to direct itself, certainly with sustained clarity, that there were these two matters for its resolution, so that in the result there were no clear findings of fact - in particular, no clear finding of facts sufficient to resolve the first question as to what was the reason for the dismissal, or if there was more than one reason, what was the principal reason? In the result, so Mr Hillier further submits, there was no good basis for the decision of the Tribunal; that decision is fatally flawed and we must remit the matter back to the Tribunal for the relevant facts to be found.

In an equally cogent response, Mr Shrimpton has submitted that on a proper analysis of the extended reasons, the Industrial Tribunal sufficiently directed itself as to the issues and sufficiently resolved them by way of findings of fact. He submits without any opposition, that if the necessary findings of fact can be discerned from the extended reasons, such cannot be set aside in the absence of perversity and that the decision is thus sustainable. Having thus set out the opposing submissions, critical to their resolution is that which appears in the extended reasons as to the evidence that was before the Tribunal. Relevant are paragraphs 2, 3 and 4. We quote:

"2. We heard evidence from Mr Blake, who was the Administrative Receiver of Netasset Limited. He read a statement in which he said that he was appointed receiver in the late afternoon of 13 August 1991. He was appointed by the bank which in addition to general charges over the Respondents' property had given a guarantee of performance bond on behalf of Duratube and Wire Ltd in respect of the fulfilment of that company's contractual obligations in respect of a contract proceeding in the Middle East. Mr Blake went on to say that he negotiated an overdraft from the bank appointing him. The key issue was to minimise overheads while retaining sufficient resources for the company to complete the Middle East contract. He therefore entered into discussions and consultation with Mr Johns, the Managing Director and Mr Duffey, the Personnel Manager and between them they drew up a list of essential employees. On 15 August 98 employees - 69 shop floor workers, 27 office staff and the Marketing Director and Sales Director were either dismissed or had already resigned.

3. Mr Blake went on to say that with the company able to continue trading the next step was to find a buyer and the business was first advertised for sale on 16 August 1991. This was the earliest date Mr Blake said after his appointment as receiver when he was able to advertise the business for sale. He said a formal offer from certain interested parties was made on 2 September and he had, by 3 September met eight interested parties, not including Oasis International Trading Limited. Officials of this company first visited the company's premises on 9 September. By this time Mr Blake was in difficulties as he could not have continued trading beyond 20 September and the contract for the Middle East work by that time been practically completed. Oasis made a formal offer on 11 September and an off the shelf company called Alnery 1103 Limited was formed to buy the assets and thereafter changed its name to Duratube Limited. Oasis was the majority shareholder of this company and the sale was concluded on 24 September 1991.

4. Cross examined Mr Blake agreed that he had decided early on to sell the business as a going concern and that he had given instructions for the placing of the advertisement in the Financial Times probably on the day after he was appointed Receiver. He had made a decision on his appointment that the business must be sold if possible. He could not be exact as to the day on which the advertisement had been sent to the Financial Times but the advertising agents did have facilities for placing advertisements with the Financial Times on the day before publication. He agreed that it was probable the decision had been taken to place the advertisement before the dismissals had taken place."

It is manifest that the evidence thus summarised by the Industrial Tribunal raised issues as to the reason, or if more than one reason, the principal reason for the dismissals. Were the dismissals motivated by that which was set out in paragraph 2, or were they motivated by that which was subsequently set out in paragraph 4, or what was the appropriate third alternative finding as to fact? On the one hand Mr Blake had given his evidence in chief. On the other hand Mr Shrimpton plainly tested it, to some effect, in the course of his cross-examination. There then was the field in which this Tribunal had to make findings of fact. We have been able to discern only two findings of fact from the extended reasons. The first finding comes in paragraph 4 of the extended reasons and is as follows:

"... On the basis of this evidence from Mr Blake we make a finding that the decision to sell if a buyer could be found was made very shortly after Mr Blake was appointed receiver and certainly before close of business on 13 August. As to the question of the advertisement we find the decision to place this advertisement in the Financial Times as soon as practicable was made on either 14 or 15 August and that it was certainly made before the employees were dismissed on 15 August."

For the other finding of fact we have to go to paragraph 7, and in particular the following passage:

"... On the question of the particular fact he [Mr Shrimpton] referred us to Mr Blake's letter to the Industrial Tribunals of 14 November 1991 which will be found at pages 57 and 58 of the Applicant's bundle and particularly the third sentence of the second paragraph which reads as follows `a decision was made very rapidly that the best price for the business would be obtained by selling it as a going concern which would incidentally guarantee the retention of the greatest number of jobs'. He therefore submitted that the dismissals must be considered to be the logical consequence of the decision taken by the receiver to keep the business going while he attempted to sell it. On this point we find from Mr Blake's evidence as we have said previously in this decision that he did come to an intention to sell the business on 13 August and that his whole actions thereafter were geared towards trying to obtain a purchaser."

Leaving aside those two passages, no-one concerned in this appeal has been able to discern any further findings of fact from the extended reasons, specifically directed to the conflict that arose between that which was said by Mr Blake in chief and that which he conceded to Mr Shrimpton in the course of cross-examination, if indeed there was conflict between such contentions. Further, and more pertinently, no-one has been able to find in terms, specific findings as to what was the reason for the dismissal, or if there was more than one reason, what was the principal reason?

We readily accept Mr Shrimpton's submission that it was open to this Industrial Tribunal as the fact finding body, having the advantage of hearing Mr Blake in chief and in cross-examination, to make such reconciliation and to make the required findings of fact. If and when those findings were made, then of course this Tribunal must be loyal to them. But the question is, was it done? Giving the best reading we can to such findings as we can discern, we are not satisfied that there was an adequate factual basis found by this Tribunal to resolve the issues that were before it. We suspect that the problem may have arisen through the plethora of authorities which were cited to that Tribunal, which may in turn have inflicted inevitable confusion, diverting the eye from the essential two issue `ball' to other peripheral matters, without clarifying the approach as a whole. In a nutshell, if the transfer was the reason or the principal reason for the dismissals, how is such to be reconciled with that which was set out in paragraph 2?

That analysis of the problem is contributed to by examination of the various reiterations by the Tribunal of what it perceived to be the essential question that was before it. Thus, in paragraph 1 it had put the matter thus:

"... whether the gap between the dismissal of the Applicants on 15 August 1991 and the sale to the Respondents concluded on 24 September 1991 was so long a gap that it could not be said that the transfer, or a reason connected with it was the reason or principal reason for the dismissal."

That direction to itself, contrasts with that which it sets out in paragraph 7:

"The real question here is not whether the transfer was effected over a period of time but whether if a receiver merely forms an intention to sell a business, carries out that intention by advertising the business for sale and then some weeks later receives first a number of offers and secondly, concludes the sale with a person who appears on the scene after those offers had been received are earlier dismissals by the receiver for a reason connected with the transfer if at the time the dismissals take place a sale is simply the receiver's preferred option."

It is not just the drafting that we draw attention to, but the inevitable concern that that drafting reflects by that stage, a failure to appreciate that the essential issue for the Tribunal was a very short simple one to express, and no doubt quite a difficult one to resolve, and it appears earlier in this particular judgment.

Thus it is, we are satisfied that Mr Hillier's submissions are well-founded and we are satisfied that in the result the appeal must be allowed and the matter must be remitted for re-hearing by a differently constituted Tribunal, so that these essential questions of fact can be properly and clearly resolved. We remit it with reluctance, having regard to the implications but we feel that we are driven to do so. Before departing from this case, we would seek to assist that further Tribunal by drawing attention to the decision in Michael Peters Limited v Farnfield [1995] IRLR 190. This decision was not before the Industrial Tribunal because it was arrived at after the hearing before them. We draw attention to it because at page 192 paragraph 25, this Tribunal offers a resolution of that which appeared to be a conflict between Harrison Bowden Ltd v Bowden [1994] ICR 186 and Ibex Trading Co Ltd v Walton [1994] ICR 907. We would respectfully like to associate ourselves with that reconciliation, albeit appreciating that in the circumstances of Michael Peters Ltd v Farnfield it was obiter.

Finally, may we pay tribute to the submissions that we have received from Mr Hillier and Mr Shrimpton. They have been a pleasure to receive and have assisted us greatly.