United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR S JONES (of Counsel) Messrs Speechly Bircham Solicitors Bouverie House 154 Fleet Street London EC4A 2HX
For the Respondents	MR N STOREY (of Counsel) Messrs Brain Lewis & Co Solicitors 17 The Broadway Crawley West Sussex RH10 1HD


 


MR JUSTICE LINDSAY: We have before us an appeal by P & O Property Holdings Ltd ["P & O"] against a decision of the Industrial Tribunal under the Chairmanship of Mrs M. H. Don given on the 6th June 1996. The applicants who were successful before the Industrial Tribunal were Mr S. Allen and 11 others ["the Security Men"] who had been security guards at P & O's premises known as Chelsea Harbour.

The procedural background to the Industrial Tribunal's hearing was unusual and needs briefly to be described. In late October 1994 Solicitors acting for the Security Men wrote to the Central Office registering the claims of the Security Men but not giving any details at that stage. By the 27th January 1995 "Further and Better Particulars of the Applicants' claims" setting out some parts, at least, of a case for unfair dismissal were sent by those solicitors (although it does not seem there had been any claim to which the Particulars were "Further and Better"). On the 1st March 1995 P & O's grounds for resisting the Security Men's claims included that:-

"The Respondents contend that the Tribunal does not have the jurisdiction to hear this application by virtue of Regulation 5 (4B) of the Transfer of Undertakings (Protection of Employment) Regulations 1981".

P & O was thus at that time intending to argue that there had been a transfer falling within TUPE, that P & O had been the transferor, that the Security Men had objected to that transfer and that the Security Men therefore "Shall not be treated for any purposes as having been dismissed by the transferor" - TUPE 5 (4B).

By the 4th April 1995 the Chairman assigned to deal with the case had directed that there should be a preliminary hearing on, and only on, a point identified as:-

"Whether a tribunal has jurisdiction to determine the applicant's complaints by virtue of Regulation 5 (4A) and (4B) of the Transfer of Undertakings (Protection of Employment) Regulations 1981".

The point at issue had thus widened beyond 5 (4B) to include 5 (4A) which relates, in turn, to the applicability of 5 (1) and 5 (2).

A date was fixed for the preliminary hearing, the 7th July 1995, but at a late stage the Security Men applied for an adjournment. The adjournment was refused but the date was not abandoned but rather was used for a discussion as to the future conduct of the case. P & O then argued that the case should have been brought against another company, Opus Protection Services Ltd, a company which the Security Men's solicitors accepted was the transferee from P & O under a transfer that fell within TUPE Regulation 3. The Chairman directed there should be a preliminary rather than a full hearing, that the question for it should remain as had been described in the letter of the 4th April and that evidence would be confined to evidence relevant to that preliminary issue.

The preliminary hearing took place on the 3rd and 17th May 1996 and the decision, as we have indicated, was given on the 6th June. The decision itself reads:-

"The unanimous decision of the Tribunal is that we have jurisdiction to hear the applications that the Applicants were constructively and unfairly dismissed. We invite the parties to agree compensation and to apply to the Tribunal within the next four weeks for a hearing to determine the full issues if compensation cannot be agreed. The hearing will be before the same Tribunal. ..."

Plainly that reference to "compensation" was strange after a preliminary hearing at which the evidence, it had been said, would be directed only to the evidence relative to the preliminary issue of jurisdiction. In the course of the preliminary hearing and, as we are told, at a relatively early stage, P & O renewed its argument that, as paragraph 10 of the Industrial Tribunal's "Extended Reasons" puts it:-

"It was maintained, on behalf of the Respondents, that P & O Property Holdings Ltd were not the correct respondents and that Opus Protection Services Ltd were the correct respondents. It was maintained by Mr Hodder [consultant for P & O] that by virtue of Regulation 5 (2) (b) of TUPE the liability for anything done before the transfer was completed by P & O ... rested with Opus ...".

The Industrial Tribunal's response to that argument was, unfortunately, not to rule upon whether or not P & O was a respondent against whom a proper case could be made but only that:-

"It is not for us at this stage to decide whether or not Opus ... should have been named as Second Respondents".

In the circumstances, although Mr Jones, Counsel for the Appellant before us, P & O, had other points, a logically preliminary point before us was whether P & O could be liable for any unfair dismissal of the Security Men, even assuming (against P & O's case on the other points) that the Security Men were, indeed, unfairly dismissed. Even to deal with this restricted point something need to be said as to the background facts.

The facts as found by the Industrial Tribunal were that on the 19th April 1994 the Security Men were informed that there was likely to be a transfer of their employment. On the 11th May they were told that there would be a transfer to an outside contractor. The outside contractor was not then identified although they were informed that the likely transferee would be Opus. They were told that conditions likely to be offered by the transferee would be unlikely to be the same as had been enjoyed by the Security Men whilst in the employ of P & O. Each of the Security Men was led to believe that if he resigned before the transfer P & O would make a not insubstantial payment to each person so resigning but that if a man failed so to resign then he would receive a sum but that such sums would be not as beneficial to them as those offered by P & O upon their resignation before the transfer. Information came to the Security Men in dribs and drabs; they were told that if they did not put in letters of resignation in writing then they would be deemed to have resigned but that in such a case the cheques payable to them from P & O would not go through. Opus itself never arranged meetings with the Security Men. Thus the Industrial Tribunal found the case to be:-

"The [Security Men] were faced with a situation whereby they either resigned from the Contracts of Employment and received a beneficial sum tax free from [P & O] or they transferred to Opus ... on uncertain terms and with a less advantageous package from [P & O]".

The Industrial Tribunal found that the Security Men had every reason to believe that their service package would be less favourable with Opus than it had been with P & O; other employees working at Chelsea Harbour but already employed by Opus were known to the Security Men to be required to work for longer hours for a lower rate of pay. It was the Security Men's evidence before the Industrial Tribunal that they were pressurised by P & O into signing resignation letters and were told that if they did nothing they would be deemed to have resigned. The Industrial Tribunal found on the evidence that the Security Men were being asked to transfer to Opus on terms and conditions that were far less advantageous in terms of working hours, pay and benefits than they had been enjoying in the employ of P & O. The working hours would be increased from 42 to 56 hours a week; wages would be reduced from £6.40 an hour to £4.60 an hour. There would be a loss of pension rights. There would also be a loss of fringe benefits, for example in the reduction in the cost to the Security Men of P & O travel facilities. The Industrial Tribunal held:-

"There was clearly going to be detriment to the Applicants if they transferred their employment. They resigned because of this perceived detriment."

The letters of resignation to which we have earlier referred were required to be handed in by the Security Men by the 17th July 1994. An example of a letter of resignation was put in front of the Tribunal and read:-

"With ref to your request, I am confirming that I will not be taking up with Opus Protection Services".

The letters were signed in the second or third weeks of July 1994. The transfer from P & O to Opus took place on the 1st August 1994. That suffices as background to enable us to deal with the preliminary argument of P & O, to which we now turn.

If the Security Men, by way of letters of resignation (let it be assumed, in circumstances as to which they have no complaint) resigned before the transfer to Opus then, as they were not, on this basis, employed "immediately before the transfer" within TUPE 5 (3), there would be no transfer of liability in respect of their contracts of employment from transferor to transferee effective under Regulations 5 (1) and (2) as those Regulations would not then apply. P & O, would have remained responsible under their contracts of employment down to the point of resignation, but, as it has been assumed that there were no circumstances justifying a complaint as to resignations, there could be no liability in P & O beyond ordinary liability for the wages and so on payable down to that point. P & O, on this basis, would escape without any possible finding against it as to unfair dismissal.

Assume, alternatively, against P & O that they did act improperly in relation to the Security Mens' contracts of employment. Assume that P & O behaved so badly that the Security Men could regard themselves as having been constructively dismissed rather than as having voluntarily resigned. That (assumed) dismissal, in order to be complained of before the Industrial Tribunal, could only be a dismissal the reason for which was the impending transfer or the impending less favourable treatment of the Security Men after the transfer which was to be the consequence of the transfer. The dismissal would thus inevitably be a dismissal within Regulation 8 (1) of TUPE which reads:-

"Where either before or after a relative 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 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".

But the fact, as it would then be, that there had, on this assumption, been an unfair dismissal within Regulation 8 (1) has a consequence on the effect of Regulation 5 (3). In Regulation 5 (3) the words "A person so employed immediately before the transfer" have long been held to be enlarged to read as if they said "Or would have been so employed if he had not been unfairly dismissed in the circumstances described in Regulation 8 (1)" - see Litster -v- Forth Dry Dock Co. Ltd. 1989 ICR 341 per Lord Keith at p. 350A, per Lord Templeman at p. 353H, Lord Oliver at p. 371F.

Accordingly, if there is an unfair dismissal under Regulation 8 then the effect of Regulation 5 (3), so enlarged, is that Regulation 5 (2) takes effect. Regulation 5 (2), so far as relevant, provides that on the completion of a relevant transfer:-

"(a) All the transferor's rights powers duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee;

and

(b) Anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part shall be deemed to have been done by or in relation to the transferee".

If, therefore, P & O, the transferor, was liable in connection with the Security Men's contracts of employment then that liability is transferred to Opus. If acts on behalf of P & O before the transfer was completed, being acts in respect of the Security Men's contracts, were done before the transfer was completed by P & O those acts have to be deemed to have been done by Opus. Accordingly the position is arrived at in which either P & O did nothing wrong and cannot be liable or P & O did do things that were wrong but in the circumstance that the liability for that wrong is switched to Opus.

We have found nothing in the other parts of Regulation 5 that can stand in the way of such a conclusion. Regulation 5 (4), which provides that Regulation 5 (2) does not transfer liability for criminal offences, if anything emphasises that for things short of being such offences liability is intended to be transferred. Regulation 5 (5) is careful to preserve rights which employees have arising apart from the TUPE Regulations, for example rights at common law, but it does not purport to confer any rights (at all events other than in the situation, with which we are not concerned, where it is only a change in the identity of an employer which is a detrimental and significant change). Moreover, for what it is worth, unlike paragraphs 5 (1) and 5 (4A), it may be that paragraph 5 (2) is permitted to affect a man's common law rights; the opening words of 5 (5) refer expressly only to 5 (1) and 5 (4A).

For these reasons the Industrial Tribunal should, in our judgment, have ruled in P & O's favour that it was not the correct respondent. Our conclusion gives us little satisfaction. It may perhaps be unfair to form a view against P & O in a case where it could reasonably have been understood by that company that the only evidence to be called at the Industrial Tribunal was evidence relating strictly and only to the preliminary point which the Chairman had identified. Nonetheless, we see some justice in the Industrial Tribunal's conclusion that the Security Men had been pressurised into resigning their employment and that the letters of resignation were not what one might call true resignations. We see no justification for P & O's assertion to the men that if they did not sign their letters of resignation they would be deemed to have resigned. Whether deliberately or not, P & O seems to have been ready to take advantage of the likely ignorance, in the Security Men, of the effect of the TUPE Regulations. But the disfavour with which, rightly or wrongly, we regard P & O's conduct cannot deter us from the conclusion, as expressed above, that P & O was not the right respondent.

Two matters remain for comment. On behalf of the Security Men Mr Storey drew our attention to Merckx and Neuhuys -v- Ford Motors Co Belgium SA [1996] IRLR 467 in the European Court of Justice. At the time the matter was before it the Industrial Tribunal had only the short report of the Merckx case in The Times. The Plaintiffs in that case worked for Anfo. Anfo were Ford dealers in Brussels. Anfo discontinued its activities and Ford transferred the dealership to another company. The plaintiffs did not wish to be employed by the new company and refused to work for them. There was remitted to the European Court of Justice a question as to whether there was a transfer of an undertaking within the meaning of the Directive in the particular circumstances that there occurred. At paragraph 35 the Court said:-

"It follows that, in the event of the employee deciding on his own accord not to continue with the contract of employment or employment relationship with the transferee, it is for the Member States to determine what the fate of the contract of employment or employment relationship should be. The Member States may provide, in particular, that in such a case the contract of employment or employment relationship must be regarded as terminated either by the employee or the employer. They may also provide that the contract or employment relationship should be maintained with the transferor ...".

In paragraph 37 of the Merckx case it was said that if the contract or relationship was terminated because the transfer involved a substantial change in working conditions to the detriment of the employee, the employer is to be regarded as having been responsible for termination. But it is not altogether clear which employer is there in mind, the transferor or the transferee. At paragraph 38 the Court states:-

"Where the contract of employment or the employment relationship is terminated because the transfer involves such a change, the employer must regarded as having been responsible for the termination".

Again, which employer was there in mind is not clear but we do not read Merckx as precluding the right of Member States to regulate which employer is to be responsible in such cases and accordingly see nothing in Merckx that conflicts with the provisions of Regulation 5 (2). In effect, our domestic legislation, as a matter of policy, identifies the transferee as the responsible employer. Merckx, in our view, does not begin to say that that must be wrong and so does not affect our conclusion that P & O was the wrong respondent.

We said two matters remained; the second is this; it would in our view be unfortunate if, by reason of the unusual procedural course this case has taken, the Security Men were left without having their possible claims against Opus able to be judged on their merits. We were not addressed on the subject of whether or not the men would be out of time as against Opus nor as to the exercise of any discretion which might permit them, if they are, to proceed out of time. It is not to us that the exercise of any such discretion falls and without, of course, intending to fetter in any way the discretion of those who may have to exercise it, we only suggest that the procedural history here might be thought to provide powerful grounds for an exercise sympathetic to the position in which, through no apparent fault of theirs, the Security Men now find themselves.

If we are correct in our conclusion that P & O cannot be the right respondent there is no point in sending the matter back to the Industrial Tribunal. We thus allow the appeal and declare that the complaint is not to proceed further against P & O.