United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	THE APPELLANT IN PERSON
For the Respondents	MR BOWERS (of Counsel) Merssrs Allan & Overy Solicitors 9 Cheapside London EC2V 6AD


 


JUDGE PETER CLARK: This is an appeal by Mr Parmar, the applicant before the Manchester Industrial Tribunal sitting on 8th May 1996, against an order of that tribunal refusing his application, made under Rule 71(1) of the Industrial Tribunal Rules of Procedure 1993, to join as a respondent to his originating application a company Ferranti Technologies Ltd ["Technologies"]. Extended reasons for that order are dated 21st May 1996.

History

The applicant, a Chartered Engineer, commenced employment with Ferranti International Plc ["Ferranti"] on 2nd November 1987. At first he worked within the Business Strategy Unit at Moston, Manchester and in August 1992 he was transferred to the Cairo Mills, Oldham site, where Ferranti's Components Business ["FC"] was located.

Ferranti, a major player in the defence industry, ran into serious financial difficulties. During 1993 GEC Plc expressed an interest in purchasing the shares in Ferranti, but following due diligence investigations GEC pulled out of the proposed rescue operation on 30th November 1993, and as a result of that decision Mr J A Talbot and Mr M L McKillop of Arthur Andersen & Co were appointed joint administrative receivers ["the receivers"] to Ferranti under the terms of a debenture.

It became immediately apparent to the receivers that it was necessary to reduce overheads, in particular the wages bill, if the business was to have any hope of continuing to trade at all. Accordingly, on 10th December 1993 the receivers announced that some 609 employees out of a total of workforce of about 3,200 were dismissed with immediate effect. The appellant was one of the 609.

Following his dismissal the appellant presented a complaint of unfair dismissal to the Industrial Tribunal, naming as respondents (1) Ferranti and (2) Arthur Andersen.

In all some 200 of the 609 employees dismissed on 10th December 1993 presented complaints of unfair dismissal. In addition three of the recognised trade unions presented claims for a protective award.

Components

The appellant has placed before us articles which appeared in the national press, the first of which is dated 23rd March 1994, reporting an interest in a Management Buyout ["MBO"] of the Oldham components division. In fact it appears from those articles that first one and then a second attempted MBO failed and it was the final third bid which succeeded.

From material provided by Technologies it seems that on 31st October 1994 the components business was transferred by the receivers to a hived down company, subsequently Technologies, and that the shares in that company were acquired under an MBO by the third MBO team to bid on 8th December 1994.

Tribunal proceedings

A protective award was made by the tribunal in March 1995 on the trade union complaints, and on 1st August 1995 a directions hearing was held in Manchester to determine how the individual applications were to be dealt with. The appellant had already made clear, in a letter to the tribunal dated 25th July 1994, that he wished to have his case heard separately from the others.

In due course all but six of the individual applicants reached a compromise of their claims with the receivers. The appellant was one of the six outstanding applicants.

A hearing of those six complaints was arranged for 8th May 1996. Shortly before that hearing the appellant wrote to the tribunal on 22nd April 1996 raising, for the first time, the possible application of the TUPE regulations, and a potential claim against Technologies as a relevant transferee of the components business. He was invited to make any application at the hearing by a letter from the tribunal dated 1st May 1996.

At the hearing the appellant applied unsuccessfully to join Technologies as a respondent. The tribunal's reasons for refusing the application are set out at paragraph 14 of their extended reasons in this way:

"14. Mr Parmar's claim /

Unfair Dismissal: Mr Parmar does ask us to consider re-instatement or re-engagement. He applies to amend his proceedings to make Ferranti Technology Limited the second respondents. He invites us to do that on the basis that the respondent company which employed him transferred its business to that Company. He does no know when that occurred. He concedes that he does not want to be re-employed by the respondent company [Ferranti] now since he concedes they no longer run the business in which he was employed. It is not his fault that there has been the delay to today in dealing with remedy. On the other hand he did not originally allege that there was a transfer of undertaking and that he was dismissed as a result although he now wishes to do so. We do not understand that claim to be a strong claim. We regard his claim to re-engagement by the other Company as at best, speculative. We have borne in mind the fact that he clearly asked for re-instatement against these respondents [Ferranti] right at the start on his Originating Application. On the other hand we have now come to the conclusion, after discussing it as length, that it would not now be right to allow an amendment to introduce another party on such a speculative argument. We come to the conclusion that re-instatement or re-engagement is impracticable because the respondent company [Ferranti] is no longer in control of the business in question."

Having refused the application for joinder, the tribunal went on to consider the appellant's claim for compensation against Ferranti, liability for unfair dismissal having been admitted by that respondent. In a second decision with reasons dated 2nd July 1996 the tribunal awarded the appellant compensation for unfair dismissal in the maximum sum of £11,000. They record in their reasons that on 16th January 1995 the appellant accepted a six month contract to work for GEC in Weybridge, Surrey. That contract was later extended and on 16th February 1996 he became a full-time employee of GEC.

The Appeal

The appellant launched this appeal by a Notice dated 22nd June 1996. The matter came before this appeal tribunal on 13th November 1996 on an ex parte preliminary hearing. On that occasion we gave leave for the appeal to proceed to a full hearing, and further directed that the Registrar write to Technologies, inviting them to make application to be joined as a respondent to this appeal under Rule 18 of the Employment Appeal Tribunal Rules 1993. That she did on 14th November 1996.

By letter dated 20th December 1996 solicitors instructed on behalf of Technologies (Allen & Overy) wrote to the Registrar indicating opposition to that company being joined in the Industrial Tribunal proceedings, but applying for leave to be joined as a respondent to this appeal. The Registrar directed that such application be made before us at today's hearing.

Mr Bowers appears on behalf of Technologies to make that application and, without objection by the appellant, we accede to it. We have therefore heard submissions from both relevant parties at this full appeal hearing.

The parties' submissions

Mr Parmar presented an outline written submission which displayed conspicuous thought, clarity and research.

He argues that on the material available he had shown an arguable case that he was employed in that part of Ferranti's business which was transferred to Technologies immediately before the transfer, and that his dismissal was by reason of that transfer.

He relies upon the extension to regulation 5(3) of the TUPE to be found in the words of Lord Oliver in Litster v Forth Dry Dock Engineering Co Ltd [1989] IRLR 161 at paragraph 50 of the report, where his lordship said:

"... In effect this involves reading regulation 5(3) as if there were inserted after the words 'immediately before the transfer' the word 'or would have been so employed if he had not been unfairly dismissed in the circumstances described in regulation 8(1).' For my part, I would make such an implication which is entirely consistent with the general scheme of the Regulations and which is necessary if they are effectively to fulfil the purpose for which they were made of giving effect to the provisions of the [European] Directive. ..."

Further, he relies upon the judgment of the Employment Appeal Tribunal given by Tuckey J in Harrison Bowden Ltd v Bowden [1994] ICR 186, where he rejected a submission made by Counsel for the transferee that in regulation 8(1) of the TUPE, which provides:

"(1) 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 his dismissal."

that the use of the definite article - the transfer - must relate to a transfer in existence or at least a prospective transferee at the time of the dismissal.

At page 191B-C Tuckey J said:

"We have considered those submissions carefully. We are bound to say that, if the construction contended for by Mr Jennings is correct, it would open a loophole in this legislation which presumes continuity of employment and attempts to ensure the protection of workers when undertakings are transferred. There is also a conceptual difficulty in distinguishing between a prospective transferee and the actual transferee. Why should it make any difference if there is one front runner at the point of dismissal who is then perhaps, as the example was put to us, gazumped by another one but in the meantime the employees have been dismissed? If their dismissal was connected with the transfer one would expect this legislation to protect them."

Here, submits Mr Parmar, the management team which eventually bought the components business was largely in place before his dismissal. Accordingly he should be allowed to argue the point, following discovery and evidence being heard.

As to the question of delay which the tribunal took into account, he accepts that he was aware of the fact that Technologies had acquired the components business of Ferranti in 1994. He took no steps to join that company as a respondent until April 1996 because he was badly advised. That should not preclude him from having his case heard on its merits.

In response Mr Bowers, who has fairly pointed out to us those matters which could be said to be against him, in recognition of the fact that Mr Parmar appears in person, support the tribunal decision on the grounds:

(1) that it was a permissible exercise of its discretion. See Adams v West Sussex County Council [1990] ICR 546, at 550G.

(2) that in exercising that discretion the tribunal was entitled to take into account the appellant's delay in making the application for leave to amend, for which he advances no good excuse. See Selhurst v Moore [1996] ICR 836, at 844B.

(3) further, that on the material now before this appeal tribunal it is clear that the tribunal was entitled to describe the prospective claim against Technologies as speculative. He relies upon the judgment of Morison J in Ibex v Walton [1994] ICR 907, where he said at page 914F-H:

"Contrary to what was said in Harrison Bowden Ltd v Bowden [1994] I.C.R. 186, we attach significance to the definite article in regulation 8(1) "that employee shall be treated ... as unfairly dismissed if the transfer or a reason connected with it is the reason or principal reason for his dismissal." The link, in terms of time, between the dismissals and the transfers will vary considerably. In Litster v. Forth Dry Dock & Engineering Co. Ltd. [1989] ICR 341 the time difference was one hour; often it will be more. A transfer is not just a single event: it extends over a period of time culminating in a completion. However, here, the employees were dismissed before any offer had been made for the business. Whilst it could properly be said that they were dismissed for a reason connected with a possible transfer of the business, on the facts here we are not satisfied that they were dismissed by reason of the transfer or for a reason connected with the transfer. A transfer was, at the stage of the dismissal, a mere twinkle in the eye and might well never have occurred. We do not say that in every case it is necessary for the prospective transferee to be identified; because sometimes one purchaser drops out at the last minute and another purchaser replaces him."

He submits, either that there is no conflict between Harrison and Ibex, as held in a later decision of the Employment Appeal Tribunal in Michael Peters Ltd v Farnfield [1995] IRLR 190, per Tucker J at paragraph 25 of the report; or, if there is, we should follow the later decision in Ibex on the principle expounded by Mummery J in Crosville Wales Ltd v Stracey [EAT/578/93 Unreported]. Transcript 11G-12D.

Conclusion

Having considered the submissions made we prefer those of Mr Bowers. In our judgment:

(1) The tribunal was entitled to take into account the fact of the appellant's delay in making the application for leave to amend the originating application.

(2) the prospective claim against Technologies is almost bound to fail. The time gap between dismissal on 10th December 1993 and the acquisition of the components business at the earliest on 31st October 1994 is inconsistent with the transfer being the reason for dismissal, following the approach of Employment Appeal Tribunal in Ibex, as we consider we should. Alternatively, even if that part of the appellant's case were made out, it is plain on his case that there was an economic, technical or organisational reason for his dismissal, in that immediate redundancies were necessary if the receivers were to preserve any part of the Ferranti business. Accordingly this case does not fall within the extension to regulation 5(3) of the TUPE articulated by Lord Oliver in Litster.

(3) in all the circumstances we are unable to find any grounds for interfering with this Industrial Tribunal's decision. No error of law had been made out.

Accordingly, this appeal must be dismissed.