United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MISS N J POWELL (Of Counsel)
For the lst Respondents For the 2nd Respondents	MR M GRANT (Of Counsel) Messrs Michael Friend & Co Solicitors 57 Hersham Road Walton-on-Thames Surrey KT12 1LJ Mr R A MEAD Representative


 


MR JUSTICE MORISON (PRESIDENT): This is an appeal against a decision of an Industrial Tribunal held at Cardiff on 12 February 1996 whereby they dismissed the Applicant's complaint of unfair dismissal.

The brief facts relevant to this appeal may be taken from the Industrial Tribunal and are as follows: the first Respondent whom we shall call "Tennant" manufacture and service commercial and industrial cleaning equipment. At the material time their activities were spread over various regions of England and Wales. The Applicant was employed by Tennant as their only service engineer in the South Wales region. His duties also covered parts of South-West England, including Avon, Devon and Cornwall. It was his task to service machines sold to businesses by Tennant.

In 1995 there was a down-turn of sales of this equipment and thus of their servicing requirements and Tennant put in hand certain reorganisations of their business. According to the Industrial Tribunal they [Tennant] absorbed Avon into their Swindon area and sub-contracted servicing in Devon and Cornwall to local companies. In their decision they make the following findings:

"4. In South Wales they entered into a "gentleman's" agreement with the second respondents, Severnside Mechanical Handling Ltd, terminable on 90 days' notice according to Tennant and on a phone call without notice according to Severnside. The agreement comprised two elements - (a) a dealership arrangement whereby Severnside as well as Tennant had the right to sell Tennant's machines, and (b) an arrangement described in negotiations as a "sub-contracting" agreement, by which any servicing of machines sold directly by Tennant would be carried out by Severnside who would then invoice Tennant for the work done.

5. As a result of the reorganisation Tennant had no need for Mr Pitts' services in South Wales and the Avon/Devon/Cornwall region. The agreement with Severnside was finalised in May 1995, and on 12 June Mr Pitts was informed by his area manager that he was to be made redundant."

The termination date that Tennant had in mind was the end of July. However, they apparently had arranged for Severnside to consider whether they [Severnside] would take on the Applicant's employment as a service engineer, to work on Tennant's machines in the SouthWales area. Accordingly, a meeting took place between Tennant and the Applicant following which he was offered the job and told Severnside he would consider it. Severnside informed Tennant that the offer had been made and was due to start on 1 July. The offer was confirmed in writing to the Applicant by a letter of the same date. A phone call followed the interview, in which Tennant asked the Applicant how it had gone; his response was that the outcome looked positive. In view of that response, Tennant understood the Applicant to have accepted and that he would be leaving them on 30 June. Tennant wrote to the Applicant confirming their understanding and recording the fact that, accordingly, his employment would be terminating on 30 June and setting out in that letter the terms of redundancy money and pay in lieu of notice.

Paragraphs 9, 10 and 11 of the decision are to this effect:

"9. Mr Pitts never replied to Severnside's offer letter of 13 June despite a reminder letter of 19 June and a phone call to ask if he had come to a decision. On 26 June Severnside wrote to him to say that as they had received no response, they assumed he was not interested in joining their company.

10. Nor did Mr Pitts reply to Tennant's letter of 14 June. They did not learn that he had ignored Severnside's offer until some time in July. At no time did he disabuse them of their belief, manifested in their letter of 14 June, that he had accepted the offer.

11. On 28 or 29 June Mr Pitts saw an advertisement by Tennant for a service engineer in the Swindon area. He did not ask Tennant if he could be redeployed to that post, or suggest any interest in it. At that stage Tennant were still under the impression that he would be working for Severnside. They were also conscious that he lived in Barry so that work from a Swindon base would necessitate relocation. It therefore did not occur to them to invite him to apply to work in Swindon. They said in evidence that had he applied they would have given him the job."

The first question which the Industrial Tribunal had to consider in the light of their findings of fact was whether there had been a transfer of an undertaking or part of an undertaking in which the Applicant had been employed, as a result of the agreement entered into between the first and second Respondents [Tennant and Severnside]. The conclusion that the Industrial Tribunal arrived at on the evidence to which we have referred is set out in paragraphs 15 and 16 of the decision:

"15. On the evidence we found

(i) no part of Tennant's business was transferred in respect of either the sales or the servicing elements of the agreement, in that Tennant retained the right to sell its machines concurrently with Severnside, and retained the servicing obligations in respect of its direct sales to customers.

(ii) the arrangement lacked any of the element of permanency or fixed or long term that characterises transfer of a business or an undertaking in that it could be brought to an end at any time by either side either on a phone call or by 90 days' notice.

16. The agreement as to servicing by Severnside to be followed by an invoice to Tennant clearly indicates a sub-contracting arrangement. We were satisfied on the evidence that the nature of the arrangement insofar as servicing was concerned was that of sub-contract, not transfer."

The first issue that arises on this appeal is whether the Industrial Tribunal have erred in law in concluding that the arrangements entered into between Tennant and Severnside, did not constitute a transfer of an undertaking to which the regulations applied. It seems to us that the Industrial Tribunal have misdirected themselves in law, in relation to the reasons which they give, for holding that there was no such transfer. As Miss Powell has submitted to us on behalf of the Appellant, there are really three questions which arise. The first is: was there an economic entity capable of existing as a going concern or, as we would prefer to put it - was there an economic entity capable of being transferred within the meaning of the regulations?

Our attention was properly drawn as had the Industrial Tribunal's attention been drawn, to various authorities which establish the correct approach for Industrial Tribunals to take when considering this issue. It seems to us that Miss Powell is correct when she says that the crucial question in a case such as this, is to ask: does the business in question maintain its economic identity. Whether the economic identity has been retained is indicated by the actual continuation or resumption of the same or similar activities. In arriving at their conclusion, obviously the Industrial will, as was submitted to us by Mr Mead on behalf of the second Respondents, have regard to all the relevant facts and circumstances. It is a requirement based partly on the Spiker's case that Industrial Tribunals should take account of all factual circumstances.

It seems to us that what has been transferred in this case was the right to sell vehicles and the right and obligations to service all vehicles sold, whether by Tennant or by the transferee in the specified regions. That is an activity which has an economic base to it. It is capable of amounting to an economic activity capable of being transferred. It seems to us not without significance, that it was Tennant's submission to the Industrial Tribunal that indeed there had been a transfer of an economic activity falling within the Transfer of Undertaking Regulations, although Mr Grant today, because of the close working relationship between the first and second Respondents, did not advance any arguments to us on the transfer issue.

The second feature that requires consideration is the Tribunal's decision that effectively there was a lack of permanency about the agreement which rendered it incapable of amounting to a business transfer. It seems to us that almost all transfers of this nature, that is akin to a contracting-out of services, will be terminable. In this case we are not in the slightest bit persuaded that it would have been a sensible conclusion to have been reached that the arrangement between Tennant and Severnside was terminable at will, that is without notice. It is manifestly obvious that a dealership agreement at least is one where the dealer may invest some of his own time and money. It is most unlikely that on an objective basis, the Court would construe such an arrangement as being terminable without any notice.

We do not go so far as to say the absence or otherwise of notice is an irrelevant factor as Miss Powell was submitting to us. There could be circumstances in which an arrangement which otherwise would have amounted to a transfer of undertakings cease to be so, because of its transient nature. But in our judgment this plainly was not such a case and could not have been such a case between two commercial entities, bearing in mind the subject matter of the agreement.

The third feature to which our attention was drawn was the Tribunal's reliance on the retention by Tennant, viz-a-viz their own customers, of the obligation to service the equipment which Tennant had sold to them. That seems to us not to be a relevant consideration or as negativing the conclusion that there has been a transfer of part of Tennant's business to Severnside. Just as a local authority will retain obligations directly to the council tax payers in relation to services which are contracted-out, that feature has never been suggested as negativing the existence of a transfer of an undertaking to which the regulations apply.

Accordingly, it seems to us, that despite the arguments put forward by Mr Mead, it is clear that there was an economic activity which retained its identity, in accordance with the authorities, after the transfer arrangements had been concluded between Tennant and Severnside, and therefore the appeal will be allowed on that point. I shall return to that matter in a moment.

The second ground of appeal was that the Industrial Tribunal's decision on the question of consultation was perverse. It seems to us that that argument is unsustainable in the light of the findings of fact made by the Industrial Tribunal. So far as Tennant was concerned they believed that the employee had accepted an offer made to him by Severnside and would be leaving their employment on 30 June. Had the employee disabused them of that position they would have acted differently, not least by offering him a service job which was available based at Swindon. It seems to us that having regard to the employee's own behaviour in this case, it is not possible to say that the Industrial Tribunal have erred in law as to their conclusions on the adequacy of consultation, given their finding that there was a redundancy situation.

The question then arises as to what order we should now make. The fact that there was a transfer of an undertaking constituted by the arrangements which were referred to in paragraph 4, seems to us not to conclude the matter in the Applicant's favour because there remains the question whether he was employed in the part transferred. It is to be noted that he was employed in that part but also he was employed to service equipment in other areas, responsibility for which was not transferred to Severnside. It will be a matter of fact and degree for the Industrial Tribunal to assess, in the light of our judgment, whether having regard to the fact that there was a transfer of an undertaking in relation to the servicing of equipment in the South Wales area, it can be said that the employee was employed in that part of Tennant's' undertaking which was transferred. For that purpose there will have to be a further hearing before the Industrial Tribunal.

Whilst it might be thought desirable that it should be in front of the same Tribunal, if there were any particular difficulties in reconvening the same Tribunal, we would not think it essential that it should be heard by the same Tribunal, but desirable that it should be if that can be reasonably practicably arranged. Accordingly, to that extent, we allow this appeal and ask for the matter to be remitted back for further consideration by the Industrial Tribunal of the issue to which we have referred.