United Kingdom Employment Appeal Tribunal

APPEARANCES

 

MR A VEALE for the Appellants


 


JUDGE J C SMITH QC: This is an application by Mr Veale and seven others who are named in the schedule to the decision for leave to proceed to a full hearing of their appeal against the decision of an Industrial Tribunal held at Leeds, when the Industrial Tribunal held that the Applicants' claims for arrears of pay and redundancy payments under s.166 and s.182 of the Employment Rights Act 1996 against the Secretary of State of the Department of Trade and Industry should be dismissed.

The ground of appeal is to the effect that the Industrial Tribunal erred in law or made impermissible findings of fact in holding that the Applicants were unfairly dismissed for a reason connected with the transfer within Regulation 8(1) of TUPE so that, as the Tribunal held, applying Litster v Forth Dry Dock & Engineering Construction Co Ltd [1989] ICR 341 and by virtue of Regulation 5(3) of TUPE the Applicants were deemed to be employed at the time of the transfer by administrative receivers of the undertaking of the business of John Ratcliff & Sons Ltd to Ratcliff (UK) Ltd on 19 August 1996.

The submission is made to us with commendable brevity and courtesy by Mr Veale who has appeared before us in person today, that it is arguable that the Industrial Tribunal reached a perverse decision on the evidence before them and that they should have found as a fact that the dismissals which took place of the eight Applicants on 5, 9 and 16 August 1996 respectively, were for an economic, technical or organizational reason within the scope of Regulation 8(2) of TUPE, ie for the reasons of a genuine redundancy situation arising from the insolvency and the consequent run-down of the business of John Ratcliff & Sons Ltd and not for a reason connected with the transfer.

Mr Veale has drawn our attention to a judgment of this Employment Appeal Tribunal in the case of Mr S Ward & Mr M Lewarne v Beresford & Hicks Furniture Ltd & Salvi International Limited (in liquidation) EAT/860/95 where on the facts before them in that case the Industrial Tribunal had reached the conclusion that the relevant employees there, namely, 35 employees who had been dismissed on 4-7 June had not been unfairly dismissed for a reason connected with the transfer, which had taken place on 15 June but rather as a consequence of the receiver's primary decision to cease trading. Mr Veale points out that in that case it was clear from the facts that the prospective purchasers did not want the burden of the contracts of employment of the 35 employees and were prepared to pay more for the business if the receivers could persuade the DoE, as it apparently then was, to accept the redundant employees' claims for redundancy payments. Despite that, he points out, the Industrial Tribunal held in that case that the dismissals of the 35 were not for a reason in connection with the transfer and the Employment Appeal Tribunal upheld their decision in its judgment.

In our judgment, if we may say so with respect, we have been greatly assisted by the very clear judgment contained in that particular decision of the Employment Appeal Tribunal and we have found that of considerable assistance in our consideration of this application.

It is against those submissions that we have looked to see whether the Industrial Tribunal decision in the present appeal does disclose any arguable error of law or any arguably perverse finding of fact.

The Industrial Tribunal made their findings of fact in paragraphs 2 to 8 of their decision to which full reference should be made should this matter go any further. Their findings can be summarized as follows - and we repeat that it is only a summary. In 1996 an old established firm by name John Ratcliff & Sons Ltd had unfortunately to appoint receivers due to the insolvency of its main customer. Mr Wilson, a chartered accountant, was appointed receiver with effect from 19 July 1996. He made some redundancies in July which are not in question. From the first there was regular contact with Mr Veale, who was the sales and engineering director, according to the findings of the Industrial Tribunal, and Mr Hatton, who was the production director. By 25 or 26 July the possibility of Messrs Veale and Hatton, together with Mr Ratcliff, acquiring the undertaking was under active consideration and it was from then onwards, according to the findings of the Industrial Tribunal.

At the same time by 2 August the major contract, the Holland contract, was coming to an end and the Industrial Tribunal found that Mr Wilson was going to have to take some hard decision in discharge of his duty to the creditors. Concurrently, matters were developing fast with regard to the acquisition. On the findings of the Industrial Tribunal a draft contract was in existence by 5 August 1996. On 5 August 1996 four of the eight were dismissed, on 9 August a further three were dismissed and on 16 August the final one of the eight Applicants was dismissed.

In paragraphs 6 and 7 of their decision the Industrial Tribunal made what we regard as key findings with regard to Mr Wilson's evidence and motivation in implementing these particular dismissals. We think it helpful if we quote from paragraphs 6 and 7:

"6. Mr Wilson expressed the view that these dismissal would have occurred irrespective of whether or not the business was sold either as a going concern or piecemeal. However, in his evidence, he made it clear that the decision to dismiss the 8 applicants was not only occasioned by the needs of the business but also because he had in mind other reasons. Those other reasons were that he was aware that Mr Veale and Mr Hatton would be unwilling to take on the commitments of long servicing employees and he was concerned that the sale of the business could have been jeopardised had the employees been kept on.

7. Mr Wilson had discussed [TUPE] with Mr Veale and Mr Hatton and he knew that they had concern as to the possible impact of the Regulations on the financing of the deal. These discussions took place prior to 5 August. Mr Wilson was sure in his own mind that he was dealing with the sale of the business and it was for this reason that he raised {TUPE] as an issue. He made it clear to Mr Veale and Mr Hatton that the Regulations would probably apply if the business was bought in the way it was proposed although he admitted that not a great deal of detailed discussion took place with regard to the Regulations. He was aware that Mr Veale and Mr Hatton were being advised by solicitors and he assumed that they would take advice from solicitors on that point. He was, however, satisfied that when he pointed out the impact of the regulations, the reaction of Mr Veale and Mr Hatton was that it would be a liability they would not want. Moreover, they were concerned whether the impact of the regulations may be that they would lose their own redundancies. Certainly Mr Veale and Mr Hatton preferred that the redundancies should be made before the sale was effected. Mr Wilson conceded that the earlier redundancies had not involved a consideration of TUPE. At that stage the possibility of the sale of the business had not even been broached let alone any definitive arrangements made. However, he was concerned about the impact of the regulations for the final eight redundancies because by then Mr Veale and Mr Hatton had become involved in discussions for the sale of the business. Mr Wilson could not recall any discussion with regard to any possible plans that Mr Veale and Mr Hatton had with regard to the employees after the sale although he conceded that there may have been discussions."

The Industrial Tribunal then went on in paragraph 8 of its decision to hold that what had occurred on 19 August had been a transfer within TUPE. The Industrial Tribunal then correctly, in our judgment, set out the applicable statutory provisions, in particular Regulations 5 and 8 of TUPE and carefully reminded themselves of the effect of the leading decision of Litster v Forth Dry Dock & Engineering Co Ltd. They also referred themselves to the case of Harrison Bowden v Bowden [1994] ICR 186. They then posed themselves what in our judgment was the correct question in paragraph 10, namely, was the dismissal because of the transfer or for a reason connected with it. They expressed their conclusions on this in paragraphs 11 and 12.

"11. What was in the mind of Mr Wilson, what motivated him when he dismissed the applicant. Was he dismissing them to make the company more easily transferred or to allay the fears of Mr Veale and Mr Hatton with regard to the effect of the regulations? Was the dismissal therefore in connection with the transfer or possible transfer of the business? Or was it something totally independent whereby the receiver had come to the conclusion that he simply could not afford to have the staff? Having posed those questions, we are satisfied on the evidence, on a balance of probabilities that the receiver, through Mr Wilson, did dismiss the applicants in a direct connection with the transfer. Although Mr Wilson had in mind both the future needs of the business and the transfer, we are satisfied that the impelling reason, and therefore the principal reason was his concern that Mr Veale and Mr Hatton may walk away from the possible sale which had been germinated as a result of the seeds sown by Mr Wilson in the minds of Mr Veale and Mr Hatton.

12. It may well be that had there been no transfer, the dismissals would have occurred but that is not the key question. The key question is what was the principal motivation at the time the dismissals occurred. At the time the dismissals occurred the deal was very much on. An offer had been made, albeit not finally accepted, and the offer which was made, subject to an adjustment of the price, was for the deal which eventually took place and which Mr Wilson, properly representing the interests of the receivers and therefore of the creditors, was anxious should proceed. This is not a case where the receiver may have had hopes of a deal but no one on the horizon, no one in the offing, here were buyers who were ready to proceed subject only to arranging the finance. One of their concerns about arranging the finance was the potential liability which may occur as a result of the TUPE regulations. Mr Wilson had this in mind. With this in mind he went ahead with the dismissals. We are of the view that there is an inextricable link between the dismissals and the transfer. We are satisfied that the principal reasons for the dismissal was the transfer."

In our judgment the stance of the Employment Appeal Tribunal must be that provided the Industrial Tribunal apply the correct legal principles and ask themselves the correct question and provided they make findings of fact which were based upon evidence before them, their decision as to whether the reason or principal reason was connected with the transfer or whether it was for an economic, technical or organizational reason on the grounds of redundancy, is ultimately a question of fact for them to decide.

There is no doubt as the cases show that the distinction is a difficult and sometimes a narrow one and in any given case it may be that a Tribunal could reach a decision either way which would be quite unimpeachable on appeal, depending upon the facts and circumstances special to that case. Applying that approach, in our judgment the Industrial Tribunal here was fully entitled to conclude that the principal reason for dismissal of the eight was connected with the transfer in the light of their careful evaluation of the evidence given by Mr Wilson.

These were dismissals which were very close to the transfer and thus they were vulnerable to the construction that they were connected with it. In some cases, of course, of which Ward & Lewarne is an example, an Industrial Tribunal may still conclude that dismissal is for an ETO reason of genuine redundancy but in our judgment each case must turn on its own individual facts, provided the proper principles of law are applied. We should add that in our judgment the fact that the dismissals might have or, indeed, would still have occurred at some subsequent stage for a genuine ETO reason, does not in any way disentitle an Industrial Tribunal from concluding that at the time when the dismissals did, in fact, take place the principal reason was in connection with the transfer.

Thus, for those reasons, we find that we can discern no arguable error on the part of the Industrial Tribunal, either in their approach to the law or in regard to their findings of fact and, accordingly, for those reasons this application must be dismissed.