United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MS A DIAMOND (of Counsel) Messrs Waldrons Solicitors 68 High Street Brierley Hill West Midlands DY5 3AW
For the Respondents	NO APPEARANCE BY OR ON BEHALF OF THE RESPONDENTS


 


MR JUSTICE LINDSAY (PRESIDENT):

1. On the 30th January 1998 Mr M.P. Skidmore, a graphic artist, completed an IT1 claiming against his erstwhile employer, Genesis Diesinking Ltd, for unfair dismissal and redundancy, fundamental breach of contract and wrongful dismissal. He claimed that on the 9th January 1998 he had been told that Genesis was closing and that a new company, Euro-Die (UK) Ltd, would be formed on Monday the 12th of January. He said that he was told that if he took up employment with Euro-Die there would be no continuity of employment. He further elaborated his complaint. At some stage Euro-Die was joined as a second Respondent. There was a hearing before the Industrial Tribunal at Birmingham under the Chairmanship of Mr J.A. Caborn on the 30th April 1998.
2. The Tribunal's Summary Reasons were sent to the parties (which, as Respondents, had Genesis as First Respondent and Euro-Die as Second Respondent) on the 15th May 1998. The unanimous decision of the Tribunal was that Mr Skidmore had been unfairly dismissed and Euro-Die was ordered to pay him £5,665.62.
3. On the 28th May 1998 both Respondents sought a Review of that decision. The request for a Review was based broadly on Euro-Die seeking an opportunity to put facts before the Tribunal which had not been laid before it at the hearing. The parties had been told on the 27th March that the hearing would be on the 30th April. In response to the request for a Review it was drawn to the Respondents' attention that it had been not until the 28th April, two days before the hearing, that the Respondents had sought an adjournment in order to instruct a Solicitor. That late request had been refused and the hearing of the 30th April had proceeded with neither side professionally represented. The Review was refused; that decision was sent to the parties on the 16th July 1998.
4. On the same day, 16th July 1998, the Tribunal gave Extended Reasons for its decision in the substantive case.
5. On the 17th August 1998 Euro-Die indicated it wished to appeal. It did this by informal letter setting out some grounds. On the 15th February 1999 at the Preliminary Hearing at the Employment Appeal Tribunal a number of points were identified as reasonably arguable points of law and arrangements were made so that the full hearing would have before it the documents which the Employment Tribunal had relied on. That is the procedural background to the appeal on which we have heard Miss Diamond for Euro-Die. Mr Skidmore and Genesis neither appeared nor were represented before us.
6. In their Extended Reasons the Tribunal held that Euro-Die had been incorporated in August 1997 whereas Genesis had been formed some 14 years before. The two companies had a common director and a common Company Secretary and carried on business from the same premises. Genesis was, by early 1998, indebted to the Customs & Excise for VAT and sums were due from it to other creditors and for National Insurance Contributions. The Employment Tribunal held:-

"(vii) During the latter part of 1997 the second respondents undertook work that would normally have been carried out by the first respondent. Employees of the first respondent were used for this purpose. Further work that was carried out by the first respondent was invoiced by the second respondent.

(viii) On Friday the 9 January the applicant was informed:

(a) that the first respondent was ceasing to trade with immediate effect.

(b) that from Monday the 12 January 1998 the second respondent would be continuing the business previously carried on by the first respondent.

(ix) On the 9 January 1998 the applicant was paid for the week he had just worked and for a "week in hand". The applicant was not paid any "notice money" but was told that there was work for him with the second respondent commencing 12 January 1998."

7. Mr Skidmore asked about continuity of employment. As he had begun work for Genesis on the 20th June 1986 this was obviously an important consideration in his mind. The Employment Tribunal held:-

"(x) The applicant sought confirmation that his 'continuity of employment' would be protected and in the absence of the assurance he required his employment ended."

The Employment Tribunal continued:-

"4…The applicant submitted that his employment terminated on Friday the 9 January 1998, when he refused to agree to work for the second respondents without first being assured that, the period of employment with the first respondents would be aggregated for continuity of employment purposes. He was particularly concerned that if he agreed to transfer without this assurance, then very shortly thereafter his employment would be terminated and he would be deprived of his employment protection rights."

A little later the Employment Tribunal held:-

"6…. It is the unanimous decision of the tribunal that the applicant did not "resign" his … employment with the first respondent, but that he was "dismissed" within the definition of "dismissal" as set out in Section 95 (1) (a) of the Employment Rights Act 1996. Further that the applicant was "dismissed" on the 9 January 1998 the effective date of termination."

8. Mr Martin Smith, brother of Mr Kenneth Smith, the common director of both Respondent Companies, had represented the Respondent Companies at the hearing and had argued that there had been no TUPE transfer. That argument failed. The Employment Tribunal held:-

"7. … The tribunal is satisfied that there was an "undertaking" being the business of the first respondents and which was transferred to the second respondents the "transfer" being within the Transfer of Undertakings (Protection) Employment Regulations 1981 pursuant to Regulation 3 thereof."

A little later the Tribunal continued:-

"9…. The tribunal is equally satisfied that the applicant was employed in the "undertaking" that was transferred from the first respondent to the second respondent."

9. The Employment Tribunal referred themselves Regulation 8 (1) of TUPE and continued:-

"11…. Having regard to its finding of the fact and to its further findings that the applicant was "dismissed" and that there was a "relevant Transfer" within the transfer regulations, the tribunal has gone on to consider the reason for the termination of the applicant's employment; in this regard the tribunal has unanimously concluded that the "transfer" was the reason for the termination and further that having regard to the provisions of Regulation 8 (1) of the Transfer Regulations it was an unfair dismissal."

10. The Tribunal noted the regulations providing for the transfer of the transferor's liabilities to the transferee under Regulation 5 (2) and noted that in consequence:-

" … therefore whilst the applicant's employment was terminated by the first respondents on the 9 January 1998 any liability in respect thereof transfers to the second respondent."

11. The Tribunal then turned to quantification and emerged, as we have said, with the total figure of £5,665.62.
12. Turning to Miss Diamond's argument for Euro-Die, she begins with twin assertions, firstly, that there was no contract between Mr Skidmore and Euro-Die on the 9th January 1998 and hence that Euro-Die could not have been in breach of it and, secondly, that if there was any breach (as the Tribunal had held) it was only by Genesis itself. She cites Sita (GB) Ltd -v- Burton & Ors [1997] IRLR 501 for the unexceptionable proposition that at common law a third party (here Euro-Die) cannot, save in exceptional circumstances, be held responsible for a breach of contract between two other parties (here Genesis and Mr Skidmore). However, regard must in our case be had not so much to the common law as to Regulation 5 (2) of TUPE which provides:-

"(2) Without prejudice to paragraph (1) above, [but subject to paragraph (4) (A) below], 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."

13. Accordingly once the transfer had gone through, Euro-Die remained liable for its own actions and Genesis's actions in respect of Mr Skidmore's contract of employment became as if those of Euro-Die. In such a way the dismissal which was held to exist became the responsibility of Euro-Die, even if caused or effected by Genesis whilst Mr Skidmore was employed by Genesis. This first argument therefore does not, in our view, assist Euro-Die.
14. Next it is said that the conversation of the 9th January 1998, as held by the Employment Tribunal to have taken place, was not sufficient to amount to a fundamental breach of contract. Where, as here, there is no indication in their reasoning that the Employment Tribunal had had some incorrect direction on the law in mind as to constructive dismissal, the question of whether or not there has been fundamental breach is to be left to the Tribunal to assess in the light of all the evidence which it hears. The Tribunal is master of the facts. As for the law, on Friday the 9th January 1998 Mr Skidmore had over 10 years service under his belt, so to speak, with Genesis. He was told that day by a director of Euro-Die who was also a director of Genesis that there would be work for him at Euro-Die from Monday the 12th January. He asked for confirmation that his 10 years and more of continuity of employment would be protected. As there was a TUPE transfer from Genesis to Euro-Die he was asking for no more than Regulation 5 (1) would have provided. He was, to cite again the passage from the Extended Reasons:-

"… particularly concerned that if he agreed to transfer without this assurance, then very shortly thereafter his employment would be terminated and he would be deprived of his employment protection rights."

That assurance was not given to him. Miss Diamond very properly reminds us of Western Excavation (ECC) Ltd -v- Sharp [1978] IRLR 27 CA where Lord Denning says:-

"If the employer is guilty of conduct which is a significant breach going to the root of the contract of employment; or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract; then the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer's conduct. He is constructively dismissed."

15. Mr Skidmore, fearful of loss of the benefits conferred by his years of service, would not know whether Euro-Die was saying that there was no TUPE transfer or whether it was saying that even if there was it would not honour the contract for his employment which TUPE was to pass to Euro-Die. In the course of an attractive argument Miss Diamond said that here there was a confused employer not a dissembling one. But how was Mr Skidmore to know? After all, even as late as the hearing the Respondents were arguing that there was no TUPE transfer. Had Mr Smith said that he was confused and would need to consult Solicitors but would see to it that Euro-Die would fully honour Mr Skidmore's contract of employment if there was, indeed, a TUPE transfer or had he given some other holding answer until advice could be obtained the position might have been otherwise. However, the Employment Tribunal's findings include no such fact but simply that the assurance that Mr Skidmore reasonably asked for was not given.
16. Once the transfer was completed (as it was) Mr Skidmore was to be treated as if his contract of employment had all along been with the transferee, Euro-Die - TUPE Regulation 5 (1). After the transfer, therefore, Euro-Die, although, on the 9th January 1998, a prospective employer, was then to be treated as if it had been the actual employer even as at the 9th January 1998. Equally Mr Skidmore was, after the transfer, to be treated as if on the 9th January he had already been an actual employee of Euro-Die. Where an employer, in answer to a concerned employee, fails at a crucial juncture to give an assurance which asks no more than for the true employment position to be recognised on a subject as essential to the employee's ease of mind as continuity of employment it cannot be said, in our view, that that failure cannot represent so fundamental a breach of the implied terms as to trust and confidence as to entitle the employee to treat himself as constructively dismissed. If, accordingly, such a failure could be such a breach, it was open to the Tribunal as masters of fact, to hold, as they did, that it was such a breach. We cannot regard the Employment Tribunal as having erred in law in finding that Mr Skidmore had been constructively dismissed.
17. Miss Diamond argues that Mr Skidmore refused to work for Euro-Die. Had he done so in absolute terms that would have had an important consequence - see TUPE Regulation 5 (4A); his contract of employment would not have been transferred from Genesis to Euro-Die. However, Miss Diamond accepted, as she had to given the facts found, that there was here no absolute objection by Mr Skidmore to working for Euro-Die but rather that he declined to work for them in the circumstance that his request for an assurance as to continuity of employment met with no answer. That being the position, we see no error in the Tribunal's view that Mr Skidmore's employment passed from Genesis to Euro-Die.
18. Next it is urged that Mr Skidmore, in not working for Euro-Die, failed to mitigate his loss. That seems to us completely unrealistic; it was an officer of Genesis who was also an officer of Euro-Die who, on Friday the 9th January, failed to give the assurance the failure to give which could properly be regarded and was properly regarded as a fundamental breach of the implied term as to trust and confidence between employer and employee. If it could be argued that he who is constructively dismissed could and should always mitigate his loss by continuing to work for the very employer who had constructively dismissed him the whole well-settled concept of constructive dismissal would be destroyed. Moreover, that Mr Skidmore did take steps to mitigate his losses is plain from the computation that led to the award of £5,665.62 as that award includes a deduction of £2,039 in respect of his earnings in alternative employment. It thus cannot be said that the Tribunal failed to have mitigation in mind.
19. The Tribunal referred itself to the provisions for, so to speak, "automatic" unfairness where the reason for a dismissal is the transfer or a reason connected with it - TUPE Regulation 8 (1). It may be debated whether it was the transfer itself (as the Tribunal held) or (as, if it were up to us, we would ourselves have framed it) a reason connected with the transfer that was here the reason for the dismissal, namely the failure of the employer to give the assurance that the transfer would leave continuity of employment unaffected. However, either way the "automatic" provision would operate to make Mr Skidmore's dismissal unfair.
20. Euro-Die's informal Notice of Appeal by letter of the 18th August raises points beyond those argued in Miss Diamond's skeleton but those points founder because they fail to distinguish between fact (as to which the Employment Tribunal's findings, unless without any foundation at all in the evidence, are conclusive) and law. No case has been or could be argued that the findings of fact here were perverse so Euro-Die's arguments are effectively limited to those in Miss Diamond's skeleton, arguments with which we have already dealt. Despite having attended to those arguments, we have detected no error of law in the Tribunal's Extended Reasons and accordingly we must dismiss the appeal.