United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MS S LITCHFIELD (Legal Adviser) Department of Trade & Industry 10 Victoria Street London SW1H ONN


 


MR JUSTICE LINDSAY: We have before us an appeal by way of Preliminary hearing in the matter Mrs J Phelan against two Respondents, CFY Ltd as first Respondent and the Secretary of State for the Department of Trade and Industry as second Respondent. This is an appeal by the Secretary of State.

Mrs Phelan was employed by a company, Claremont Pictures, that got into considerable difficulties. A stage arrived at which it had its entire stock and equipment distrained; it had no work in progress, no orders and no stock. In that circumstance, on 25 September a Mr Clough dismissed Mrs Phelan. On the following day there was a meeting of creditors and the company, Claremont, went into creditors winding-up.

The conclusion that the Industrial Tribunal came to was that the contract of employment of the Applicant, Mrs Phelan, with Claremont Pictures, was not terminated by reason of the transfer of the undertaking of that company. The consequence of that finding was that (as it is crudely put) it was the Secretary of State who picked up the bill for redundancy. That is why the Secretary of State appeals to us.

The first point is to look at the Transfer of Undertakings Protection of Employment Regulations 1981 and the first relevant regulation to look at is 5(iii):

"Any reference in paragraph (1) or (2) above to a person employed in an undertaking or part of one transferred by a relevant transfer is a reference to a person so employed immediately before the transfer, including, where the transfer is effected by a series of two or more transactions, a person so employed immediately before any of those transactions".

The first question that one needs to ask in this area of the law is was whether the employee was employed immediately before the transfer? The answer to that is no, she was not, because what the Industrial Tribunal found in paragraph 4 of their Extended Reasons was that she remained in employment until she was dismissed, in the circumstances set out in more detail below, on 25 September 1996. In paragraph 9 it was found that Mr Clough dismissed her on 25 September 1996. I am bound to say there is some confusion in that the Industrial Tribunal held that Mr Clough dismissed the lady as agent of the liquidator as at 25 September. There was no liquidator on that day. But, for all that, they found that she was dismissed on 25 September.

Precisely when the transfer took place, we are not told but it was obviously not before or at and could only therefore have been after the meeting of creditors on 26 September. What they say about that in paragraph 10 is:

"The Meeting of Creditors was duly held. After the Meeting of Creditors, discussions took place between Mr Clough and his father-in-law as to whether a loan could be made available to Mr Clough to enable him to buy back the assets which were held by the landlord under the distraint. In fact, the landlord sold the items to K & S Enterprises, which appears to be a business which specialises in purchasing such items as "bankrupt stock" and the first respondent therefore purchased the items from K & S. The physical items never left the relevant premises."

So the time sequence is dismissal on 25 September, transfer not earlier than after the meeting on 26 September. That being so, and looking for the moment simply to the strict literal meaning of 5(iii) then immediately before the transfer Mrs Phelan was not employed. However, one then has to go, as Miss Litchfield for the Secretary of State, has drawn to our attention, to Litster & Others v Forth Dry Dock & Engineering Co Ltd [1989] ICR 341. There the House of Lords held that "immediately before the transfer" does not mean immediately before the transfer, but it means "immediately before the transfer or would have been so employed if he had not been unfairly dismissed in the circumstances described by Regulation 8(1)". That says:

"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 V of the 1978 Act and Articles 20 to 41 of the 1976 Order (unfair dismissal) as unfairly dismissed if the transfer or a reason connected with it is the reason or principal reason for this dismissal."

So that poses the next question - was the transfer a reason connected with the transfer, the reason or the principle reason for Mrs Phelan's dismissal? Well, as to that, the Tribunal found at paragraph 9:

"..... It [Claremont, the company which had employed Mrs Phelan] had no work in progress, no orders and no stock and it appeared to the Liquidator that, having regard inter alia to the distraint, there was nothing that he could sell as a going concern or otherwise."

I think where it is a reference there to the Liquidator they must mean a reference to the individual who became the Liquidator.

The Industrial Tribunal held at paragraph 17 that:

"..... The reason for the dismissal of the applicant was nothing whatsoever to do with any proposed transfer to the first respondent, even if that was a first element of a potential plan at that time. On the evidence, we are not satisfied that that was the case in any event."

It is very much a matter of fact for the particular Industrial Tribunal to determine what was the reason for the dismissal and here they have held that it was nothing to do with any proposed transfer.

Accordingly the case is not one in which Regulation 8(1) is relevant and thus the Litster case does not assist the Secretary of State.

The conclusion of the Industrial Tribunal in their last paragraph was:

"It follows that the liability to make the payments provided for in Section 166 and 184 falls on the second respondent under the provisions of those Sections. With the consent of the parties, the Tribunal leaves it to them to agree the amounts payable by the second respondent to the applicant."

In their coming to that conclusion, we have detected no error of law in the decision of the Industrial Tribunal. The reasons for the dismissal and whether those reasons are or are not connected with a transfer are essentially matters of fact for the Tribunal. We have detected no error in their Extended Reasons. Accordingly we dismiss the appeal.