United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	ANDREW STAFFORD (of Counsel) Instructed by: Messrs Langley & Co Solicitors Sun Court 66 Cornhill London EC3V 3NB
For the First to Fifteenth Respondents For the Sixteenth Respondent - (East Riding of Yorkshire Council)	THE RESPONDENTS NEITHER PRESENT NOR REPRESENTED PETER OLDHAM (of Counsel) Instructed by: East Riding of Yorkshire Council County Hall Beverley East Yorkshire HU17 9BA


 


MR JUSTICE BURTON:

1. This is an appeal against a finding by a majority decision of the Hull Employment Tribunal that there was no transfer within Regulation 3 of the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("the 1981 Regulations").
2. Judgment in this case is being given simultaneously with that in ADI (UK) Limited v. Willer, and the consideration of the law in each is in similar terms, but the decisions are by tribunals with different compositions, and hence, because the judgments have been the subject of independent consideration by each such Tribunal, and are being delivered separately, the two judgments will stand alone and are therefore inevitably repetitious so far as the setting out of the law and conclusions on the law are concerned.
3. Neither the Council Directive 77/187 ("the Directive") nor the 1981 Regulations define what is meant by the transfer of an undertaking. Article 1(1) of the Directive simply states:-

"This Directive shall apply to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger."

And s.3(1) of the 1981 Regulations states only:-

"Subject to the provisions of these Regulations, these Regulations apply to a transfer from one person to another of an undertaking situated immediately before the transfer in the United Kingdom or part of one which is situated."

4. A number of authorities have been referred to which have laid down principles and given guidance. The most central for our purposes have been the decisions of the European Court, Spijkers v. Gebroeders Benedik Abattoir CV [1986] CMLR 296, Süzen v. Zehnacker Gebäugereinigung GmbH Krankenhausservice [1997] ICR 662 and Sanchez Hidalgo v. Asociacion de Servicios Aser [1999] IRLR 136, and the two recent Courts of Appeal decisions, Betts v. Brintel Helicopters Limited [1997] ICR 792 and ECM (Vehicle Delivery Service) Limited v. Cox [1999] IRLR 559. The other relevant authorities to which we have had some recourse include Schmidt v. Spar-und-Leihkasse der Früheren Ämter Bordesholm [1995] ECR 237 (ECJ), Rygaard v. Strø Mølle Akustik A/S [1996] ICR 333 (ECJ), Superclean Support Services PLC v. Lansana EAT 20/5/1997, The Highland Council v. Walker EAT 25/1/1997, Connick Tree Care v. Chapman EAT 6/3/1998, ECM in the EAT [1998] ICR 631, CWW Logistics Limited v. Ronald EAT 1/12/1998, North East Lincolnshire Council v. Beck EAT 21/1/1999, Kerry Foods Limited v. Kreber [2000] IRLR 10 (EAT) and Allen v. Amalgamated Construction Co. Limited {2000] IRLR 1119 (ECJ).
5. The question of central importance is whether the 1981 Regulations apply where a business comes to an end, employees employed in the undertaking have apparently been made redundant, and the issue arises as to whether there is a situation in which it can be asserted that there has been transfer of the undertaking from the old ceased business to a new business, so that the employees can claim continuity of employment by transfer to such new business. The 1981 Regulations can apply not only to an 'obvious' transfer – where a business is transferred contractually between one party and another – but also to a reorganisation or rearrangement where there is no contractual relationship between the party alleged to be the transferor and the party alleged to be the transferee. See Süzen at 670 paragraph 11: "Whilst the lack of any contractual link between the transferor and the transferee or, as in this case, between the two undertakings successively entrusted with the cleaning of a school, may point to the absence of a transfer within the meaning of the Directive, it is certainly not conclusive": this was adopted in respect of the 1981 Regulations in Betts at 803E, ("In other words it is a relevant factor") and 806H, per Kennedy L.J. Examples of such transactions which can be found to be transfers are the so-called 'first generation' contracting-out, where an activity which has been carried on 'in-house' is, whether by competitive tendering or otherwise, now to be allocated to someone else to carry on, or 'second generation' contracting-out, where an activity which is already contracted out is to be carried out by a new party, as a result of the expiry of the contract with the previous sub-contractor, or even taken back in-house. There will be many occasions when it is not clear whether such first or second generation contracting-out does or does not amount to a transfer of undertaking: contrasting examples were given by HH Judge Clark in Beck, namely where on the one hand a successful tenderer, with an already established workforce and equipment, takes the place of the unsuccessful and/or departed predecessor, or on the other hand a new contractor, a successful tenderer, does not have its own workforce, or at any rate sufficient workforce to perform the contracts; and in the latter case, if that successor takes over all or part of its predecessor's workforce there may be a transfer. In many cases it will be the case, as put by HH Judge Clark in another decision of the EAT, Superclean, that "the identity of the 'economic entity' disappeared on termination of [the predecessor's] cleaning contract. There was no concomitant transfer from one undertaking .. to the other .. of significant tangible or intangible assets or taking over by Superclean of any, let alone a major part of [the predecessor's] workforce employed on the … contract." On other occasions, depending on the finding of facts by the Tribunal, the protection of employment, which is the expressed aim of the 1981 Regulations, may be achieved by a conclusion that there has been a relevant and qualifying transfer.

The questions to be asked

6. It is quite plain that there are two questions to be asked and answered by a tribunal as to whether the 1981 Regulations apply. Kennedy LJ makes this quite clear in Betts at 798C, namely:-

"(1) Prior to 30 June 1995 was Brintel's Beccles operation an undertaking or part of an undertaking for the purposes of Regulation 3(1) of the Regulations of 1981 (as properly understood in the light of Community jurisprudence)? (2) If so, was that undertaking transferred so that it retained its identity in the hands of K.L.M.? "

Thus Lord Johnstone in Walker described the "two relevant and quite separate questions", namely "whether or not there was an identifiable business entity constituting an undertaking within the meaning of the Regulations; and, secondly, assuming such could be determined, whether or not there was a relevant transfer."

7. It seems to us quite clear that a tribunal should consider these questions separately and in turn, for different considerations relate to each. It will normally be best and clearest for an employment tribunal to deal first with the question of whether there was a relevant and sufficiently identifiable economic entity, and then proceed, whatever be the answer to that question, to ask and answer whether there was (or would have been, if such hypothetical question can be answered, in the event of a conclusion that there was no such entity) a relevant transfer of any such entity. As is emphasised in all the cases, from Spijkers at 303 paragraph 14 through to Kerry Foods at 12 paragraph 10, the decision is one of fact for the Employment Tribunal, which will be rarely disturbed, particularly not if the right questions are asked.

The first question

8. Whether there is an entity has first to be identified, and what it is, not least because only in that way can there be comparison of the before and after. It must be identified as an economic entity (Spijkers at 303 paragraph 12,) but that is not sufficient. The two formulations which appear to have been most authoritatively used are as follows:

(1) Is there a stable economic entity? (Rygaard at 346 paragraph 20, Süzen at 670 paragraph 13, Betts at 803E). In all those passages there is added the words "whose activity is not limited to performing one specific works contract". But it is clear that that is, each time, a reference back to Rygaard and to the particular facts of Rygaard, which involved the transfer of the fag-end, or run-off, of a particular construction sub-contract, which, on the facts of the particular case, was held not be "the transfer of a body of assets enabling the activities or certain activities of the transferor undertaking to be carried on in a stable way" (at 346 paragraph 21). In ECM, reference was made in the Court of Appeal (at 560 paragraph 12 and 561 paragraph 23(3)) to a "discrete economic entity": and it may be appropriate therefore to talk of a "stable and discrete economic entity".

(2) The alternative version, adopted by the European Court most recently, in Sanchez Hidalgo at 138 paragraph 26, asks the question whether the entity is "sufficiently structured and autonomous". It is to be noted that the early case of Schmidt concentrated wholly on the question of transfer, i.e. the second question, and does not appear to address at all the first question, as to whether there was a stable and discrete, never mind a sufficiently structured and autonomous, economic entity, as the developed jurisprudence has led us to understand to be necessary; and this may be the reason why in Schmidt the somewhat odd result was achieved relating to the contracting-out of a cleaning activity carried on by one employee.

9. In the asking of this important first question, guidelines are given in Süzen at 670-1 paragraphs 13 and 15:-

"13. The transfer must relate to a stable economic entity … The term entity thus refers to an organised grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective.

15. The mere fact that the service provided by the old and the new awardees of a contract is similar does not therefore support the conclusion that an economic entity has been transferred. An entity cannot be reduced to the activity entrusted to it. Its identity also emerges from other factors, such as its workforce; its management staff; the way in which its work is organised; its operating methods, or indeed, where appropriate, the operational resources available to it." ...Adopted in Betts at 803, 806H).

Such an entity does not have to have assets; thus in Sanchez Hidalgo at 138 paragraph 26:-

"Whilst such an entity must be sufficiently structured and autonomous, it will not necessarily have significant assets, material or immaterial. Indeed, in certain sectors, such as cleaning and surveillance, these assets are often reduced their most basic and the activity is essentially based on manpower. Thus, an organised grouping of wage earners who are specifically and permanently assigned to a common task may, in the absence of other factors of production, amount to an economic entity."

10. It may be indicative if it is found as a fact that the employment of identified employees depends upon the continuation of a specific contract (ECM (C.A.) at 560 paragraph 13), or the dependence on a single contract may be irrelevant and simply the explanation for lay-offs and a redundancy situation in a deteriorating business. The factor that the specific purpose of the alleged entity is the performance of only one contract and/or only for one customer and/or at only one location may, or may not, be an indicator against its being a stable and discrete economic entity: see the Court of Appeal in ECM at 562 paragraph 23(6): "It is not a case (like Süzen) of the loss of a contract with one customer being asserted to amount to a transfer of an undertaking. It is not a case (like Betts) if the loss of a contract for one location being asserted to be a transfer of a undertaking.". The use of the expression "distinct cost centre" by the Employment Tribunal in CWW may, notwithstanding the resort to modern jargon, be a helpful thought process.

The second question

11. In the context of whether there is a transfer, the same passage in ECM in the Court of Appeal at 562 should be addressed: "It is not a case of a transfer depending merely on a comparison of the similarity of the activities of Axial and ECM after the loss of the VAG contract by Axial." Such similarity of activity is referred to as "necessary but not sufficient" by Morison J in ECM in the EAT at 638H, and as "relevant but not critical" by Kennedy LJ in Betts at 804H. The best and clearest guidelines are in Spijkers at 303 paragraphs 12-13:-

"12. Consequently it cannot be said that there is a transfer of an enterprise, business or part of a business on the sole ground that its assets have been sold. On the contrary, in a case like the present, it is necessary to determine whether what has been sold is an economic entity, which is still in existence, and this will be apparent from the fact that its operation is actually being continued or has been taken over by the new employer, with the same economic or similar activities.

13. To decide whether these conditions are fulfilled it is necessary to take account of all the factual circumstances of the transaction in question, including the type of undertaking or business in question, the transfer or otherwise a tangible asset such as buildings and stocks, the value of intangible assets at the date of transfer, whether the majority of the staff was taken over by the new employer, the transfer or otherwise of the circle of customers and the degree of similarity between activities before and after the transfer and the duration of any interruption in those activities. It should be made clear, however, that each of these factors is only a part of the overall assessment which is required and therefore they cannot be examined independently of each other."

The words of paragraph 13 in Spijkers are repeated almost verbatim in the seminal judgment of the European Court in Süzen at 670-1 paragraph 14, and there is then further repetition in paragraph 20 at 672:-

"In that regard, it should be borne in mind that the factual circumstances should be taken into account in determining whether the conditions for a transfer are met include in particular, in addition to the degree of similarity of the activity carried on before and after the transfer and the type of undertaking or business concerned, the question whether or not the majority of the employees were taken over by the new employer."

These passages again are adopted by the Court of Appeal in Betts at 803-4 and 806H.

12. In Betts, Kennedy LJ recognises, at 806F-G, a distinction between labour-intensive undertakings, "in which if the staff combine to engage in a particular activity which continues or is resumed with substantially the same staff after the alleged transfer the Court may well conclude that the undertaking has been transferred so that it has retained its identity in the hands of the transferee" and "other types of undertaking in relation to which the application of the Spijkers test .. involves a more wide-ranging inquiry." It is plain from Süzen at 671 paragraph 18 that it is well understood that there can be a transfer even if there are no significant tangible or intangible assets: "Where in particular an economic entity is able, in certain sectors, to function without any significant tangible or intangible assets, the maintenance of its identity following the transaction affecting it cannot, logically, depend on the transfer of such assets". Nevertheless there will always be central consideration of the assets question, and if assets e.g. equipment, are indeed transferred from the predecessor to a successor sub-contractor, then that is a very likely indicator of a relevant transfer. Other matters than title to identifiable tangible assets may be relevant. It is clear that in Kerry Foods the employment tribunal in that case was entitled to pay substantial regard to the transfer of a brand name and good will. Betts itself (at 805B and 807D) and CWW make clear that the transfer of a licence to use the owner's equipment or assets may be material, though plainly less material than transfer of ownership as between transferor and transferee: and to carry out an analysis on this kind of basis – e.g. the old cleaning company had a licence to enter the premises in order to clean, and so does the new, thus there is a transfer of a licence to enter - will end up as nothing more than the admittedly insufficient exercise of comparing the similarity of the two activities.
13. As for the labour-intensive undertaking, to which Kennedy LJ refers, in the very passage at 806F-G he indicates both the purpose of the exercise of considering the question of staff, namely to see if by reference to the staff the undertaking has retained its identity in the hands of the transferee, and the nature of the enquiry, namely whether it "continues or is resumed with substantially the same staff after the alleged transfer". The Court of Appeal in Betts at 803-804 and 806H adopts and approves the reference in the passage cited above from Spijkers at 303 paragraph 13 as to "whether the majority of the staff are taken over by the new employer", and in terms the passage in Süzen at 672 paragraph 20. At the end of paragraph 20, the European Court in Süzen again adopts the words from paragraph 13 of Spijkers relating to "the question whether or not the majority of the employees was taken over by the new employer" and then continues in paragraph 21:-

"Since in certain labour-intensive sectors a group of workers engaged in a joint activity on a permanent basis may constitute an economic entity, it must be recognised that such an entity is capable of maintaining its identity after it has been transferred where the new employer does not merely pursue the activity in question but also takes over a major part, in terms of their numbers and skill, of the employees specially assigned by his predecessor to that task. In those circumstances, as stated in Rygaard … a new employer takes over a body of assets enabling him to carry on the activities or certain activities of the transferor undertaking on a regular basis."

This passage is effectively repeated at paragraph 23, and both paragraphs are again in Betts at 804B-F, 806. Notwithstanding the upholding by the Employment Appeal Tribunal and the Court of Appeal in ECM of the particular findings of fact of the employment tribunal in that case, to which we refer below, the Court of Appeal in ECM affirmed in terms, by reference to Süzen, at 562 paragraph 23(5) that:-

"The question whether the majority of the employees [is] taken over by the new employer to enable him to carry on the activities of the undertaking on a regular basis is a factual circumstance to be taken into account, as well as the similarity of the pre-and post-transfer activities and the type of undertaking concerned e.g. in labour-intensive sectors".

It seems to us, particularly as these are only guidelines, but always within the parameters set by Kennedy LJ that one is looking to see whether the staff is "substantially the same", that the apparent contradictions, or at any rate uncertainties, in the formulation of these questions, when looking at an alleged transfer of a labour-intensive undertaking, can be reconciled. It may be that in a given case the question will be answered by totting up to see whether a majority of staff is taken on. In another case there may be a minority in number, but on examination of the skills of the employees, be they managerial, administrative or technical, the skills of those who have been taken on outweighs the mere numerical factor, such that, albeit not a majority, nevertheless those taken on constitute a major part. There may perhaps even be a reverse case where the taking on of a numerical majority would be outweighed if the significant employees, in terms of skills, who in fact constituted the important part of the undertaking, were not taken on. Again these precise questions about numbers of staff become less significant if there is a transfer of something else other than staff, so that the picture can be looked at in the round.

The ECM point

14. Into the relatively straightforward analysis above set out, of the posing and answering of the two questions, there has now emerged, as a result of the finding of fact by the employment tribunal in ECM, an additional factor. Morison J described the position thus in the Employment Appeal Tribunal at 639E:-

"In this case, on the tribunal's findings, the transferee did not take on the men precisely because they were asserting that the Regulations of 1981 applied and were threatening proceedings on that basis. An obvious inference from these facts is that thereby the transferee hoped to defeat their claims. The question arises, therefore, [whether] it is possible for a transferee to cause the Regulations to be disapplied by refusing to take on the workforce."

The Court of Appeal found (at 562 paragraph 23(6)) that "the tribunal was entitled to have regard, as a relevant circumstance, to the reason why those employees were not appointed by ECM".

15. The following factors are plainly significant:-

15.1 In Betts, in which KLM decided not to take over any staff or equipment from Brintel, a similar point was argued (794F). The conclusion that was or might have been reached, as appears from 806A and 807D, was that if there had not been a ban by KLM on taking any Brintel employees some (or a modest number of) Brintel employees might or would have been engaged by KLM. Such a consideration, albeit hypothetical, at to what would or might have happened, would or could easily be part of the factual consideration given by a tribunal. But what the Court of Appeal in Betts did not say, and indeed the Court of Appeal in ECM did not say, is that if there be a finding of fact by a tribunal that there was a deliberate decision by a possible transferee not to take on any of the possible transferor's staff, in order that, or with the intended result that, the 1981 Regulation should not apply, then in such a circumstance all the employees are deemed to have been transferred.

15.2 In any event if the 'reason why the employees were not appointed by ECM' is to be left to be considered as a factor by the employment tribunal, the interpretation and the weight must also be for them. Is subjective intention or motive, or objective purpose or effect to be judged? It may be difficult if not impossible to differentiate – if it is relevant to do so – between a decision not to take on any staff because it is desired to avoid, or not to trigger, the 1981 Regulations, a decision not to take on any staff with the effect that the 1981 Regulations do not apply and a decision that, because it is not intended to take on any staff, the 1981 Regulations do not apply. In any event, in Brookes v. Borough Care Services and CLS Care Services Ltd [1998] IRLR 636 where a contractual transfer was expressly structured as a transfer of shares in order that the 1981 Regulations should not apply, the employment tribunal, and the Employment Appeal Tribunal on appeal, held that they did not, because "the conduct of the undertaking via the first Respondent had a deliberate and genuine commercial intent interest quite independent of the 1981 Regulations" (at 640 paragraph 58). On the one hand there will no doubt be scrutiny by the employment tribunal of the transactions, on the other hand the fact that there is not a transfer, because no transfer of staff, cannot itself lead to a conclusion that there is a transfer.

15.3 Mummery LJ in the Court of Appeal in ECM is at pains to point out, at 561-2, not only, as Morison J himself had done in the Employment Appeal Tribunal, that the issue arose out of a finding by the Employment Tribunal, but also that, again as Morison J had concluded (at 639H-640B), such factor did not, on the facts of ECM, stand alone as the only basis for the conclusion that there had been a transfer. ECM is thus not itself a case which would support, or at any rate exemplify, a proposition that, in the absence of a transfer of any assets or any staff, or of any other material factor indicating a transfer, the ECM point alone would be determinative of the issue of transfer.

16. It is in all those circumstances that Mummery LJ's guidance remains (at 562 paragraph 23(6)) simply that "the tribunal was entitled to have regard, as a relevant circumstance, to the reason why those employees were not appointed by ECM".

The application to this case.

17. Economic entity?

The relevant facts found by the Employment Tribunal were:-

17.1 The Leisure World Centre, Bridlington, owned latterly by East Riding Yorkshire Council ('Riding'), was managed by Whitewater Leisure Management Ltd ('Whitewater') from 17th January 1992 until 16th January 1998, under a management contract, subject to provisions for monitoring of the operation, for certain purposes including pricing, by Riding. Due to the pricing and other restrictions, Whitewater was not able to achieve a net profit, but it was protected against loss by receipt of a subsidy.

17.2 There is no substantial evidence about the assets owned by Whitewater used in the Leisure World Centre. There appear to have been some stocks, if that is the proper interpretation of paragraph 5(i), which records the Tribunal's conclusion that no stocks were transferred; and because Whitewater expended a substantial amount of money on improvement of the Leisure Centre, almost all of which accrued to the benefit of Riding because it related to the property itself or to fixtures, this nevertheless resulted in at least a minor asset for Whitewater which was not a fixture, namely, as appears from paragraph 5(d) of the decision, the removable lockers.

17.3 Whitewater had many other operations apart from the Leisure World Centre. The six employees who formed the senior management of the Centre were also involved in those other operations; they spent part of their time in respect of the Centre, although the majority of their time was spent in other aspects of Whitewater's business. This senior management team of six carried out the bulk of the senior management role, including the marketing, project planning, designing systems and such matters as business expansion, and carried out major administrative tasks, including pay roll and related matters.

17.4 The second group of employees, answerable to the senior management team, was described as the 'core' team, and consisted of the Manager, two Assistant Managers and eleven other fulltime employees.

17.5 There was then a number of other employees, a general mix of part-time, casual and seasonal employees.

18. Transfer?

There were the following relevant findings of fact:-

18.1 Upon the expiry of the management contract, a compulsory competitive tendering process was carried out towards the end of 1997 and Riding itself, by its in-house D O S Department, was the successful tenderer, and thereafter the arrangements for the Leisure Centre were different, as it was run by Riding as one of three leisure facilities, with a new contractual arrangement.

18.2 No tangible assets were transferred from Whitewater to its successor, Riding (save the lockers). According to paragraph 5(i) of the decision, nor were any stocks:

"There was no evidence that there were any stocks or other equipment transferred from [Whitewater] to [Riding] on the cessation of the contract between [them] on the 16th January 1998. This may be accounted for by the fact that the premises seem to have been closed for a few days after the 16th January 1998."

Nor, as the Tribunal concluded in paragraph 7 of its decision, were there transferred any:

"…intangible assets by way of goodwill or the like, as the facility concerned was one which was available for use by the public and in the case of Bridlington was available to both the local community and to the tourist trade and that did not produce a guaranteed or fixed customer base. …"

The conclusion was

"… other than the workforce the Tribunal is satisfied that no assets actually transferred be they tangible or intangible."

18.3 As for the workforce generally, the Tribunal concluded, no doubt with an eye on distinguishing the VAG Contract in ECM in the Court of Appeal at 560 paragraph 13, that:

"…the increase of usage in income cannot be put down wholly to the skills of [Whitewater] and particularly not to the skills of those people who actually transferred their employment to [Riding] on or after 17th January 1998."

As far as the number of employees transferred is concerned, the six senior management did not transfer at all (all of them being retained within the senior management of Whitewater). Of the 14 "core" team, seven transferred and seven did not (the Tribunal recorded that eight transferred and six did not, but it is common ground that that was an error). Of these 14, neither the manager or the two assistant managers transferred, although one of the assistant managers, Mr Haley, was offered employment by Riding but turned it down. The majority of the third group did not transfer. Taken as a whole therefore, 13 out of the top 20 employees (including all nine most senior) did not transfer, and the majority of the part-timers and casuals did not do so. (Paragraph 8 of the decision):

"… the tribunal on these facts is satisfied that the majority of the workforce either by way of volume or by way of skill did not transfer to [Riding]"

19. The Employment Tribunal was accordingly satisfied that there was no transfer of undertaking (paragraph 9 of the decision).
20. The Tribunal did not, as in our view it should have done, ask the two questions severally, and consider separately the evidence relating to each question, notwithstanding that it referred at the outset of its conclusions, in paragraph 6, to the two authorities which advise the asking of the two questions, Betts at 798C and Walker. The Tribunal does not appear to reach an independent express conclusion about the existence of an economic entity, but appears to have assumed that there was an entity (see, for example, the first substantive sentence of paragraph 6 in which the Tribunal "concludes that in determining whether an undertaking or business (or part thereof) has in fact been transferred the decisive [criterion] is whether the entity in question retained its identity") but goes straight to the answer, after consideration of all the facts, that there was no transfer of undertaking because (i) no or no material assets were transferred (ii) the majority of the workforce whether in number or in skills, managerial or administrative, did not transfer.
21. Mr Stafford, for Whitewater, submits that the Tribunal erred in not considering the entity first. Had they done so, he submits, they might have come to a different conclusion. We have considered the Tribunal's findings and its decision, by carrying out what in our view would have been the correct process of considering each question separately:

21.1 Was there an 'economic entity'? There is plainly a substantial argument that there was not a stable and discrete entity, or a sufficiently structured and autonomous entity, because of the fact that the Leisure Centre was so intricately bound up with the rest of the operations of Whitewater. The senior management was plainly not discrete, and on the face of it, at least without evidence, which was plainly not adduced, about the Leisure Centre as a cost centre, the Leisure Centre was, if its senior management is taken into account, not discrete, and if they are left out of account, then not stable, or for that matter autonomous. The Tribunal appears to have assumed, no doubt because nothing other was argued before it, that the entity it was looking at and considering was the entity including the senior management, and, as we have indicated, it does not appear to have asked itself the separate first question as to identifying the entity. If, however it had asked itself the question, and identified the entity as including the senior management, then it would:

(i) either have identified such entity, as it impliedly did, and concluded, as it impliedly did, that the entity was sufficiently stable etc, but then gone on to conclude, as it did, that there was no transfer of such entity

(ii) or it would have concluded, as appears to us more likely, that there was no stable and discrete entity, so that the first test would have failed even before coming to the question of transfer.

21.2 If however the Tribunal had concluded, in asking itself the question, that the entity could be defined as the Leisure Centre without its six senior management, and had so identified the entity then:

(i) it seems to us unlikely that it would have been able to conclude that such an entity was stable and/or autonomous, such as to pass that test, but, even if it passed such test;

(ii) the figures for employees would then fall to be tabulated, excluding the six senior employees. Even on that basis, seven transferred, but not including the three managers, and seven, including those three managers did not, so far as the 'core' team is concerned, and the majority of the other employees did not transfer. Whether one applies the 'majority' test or the 'major part' test, it seems to us, once again in the absence of any other indicators of a transfer, such as transfer of assets or good will, that the test would fail.

22. It appears clear to us then that the Tribunal identified the entity that was being put to it, assumed it to be a relevant stable entity, but then concluded that there was no transfer: but that even if it had asked the two questions separately, it would have inevitably have reached the same conclusion, namely that there was no transfer of undertaking.
23. The ECM point was set out in the Notice of Appeal, prepared by previous Counsel, and indeed in an extreme form, for it was suggested that:

"5.2The … Tribunal erred in law in that, having decided that the only asset of [Whitewater] was the workforce, it decided that there had not been a transfer of an undertaking because of the number of employees of [Whitewater] who were employed by [Riding] after 16th January 1998 when [Riding] took over the contract.

…

5.4 The … Tribunal based its decision upon the failure of [Riding] to take on the majority of the employees of [Whitewater]. The … Tribunal erred in law in finding that [Riding] was not liable under the Transfer of Undertakings (Protection of Employment) Regulations 1981 as:

(1) the effect of the decision is that a transferee can limit the extent of its obligations under the Regulations by refusing to comply with those obligations in the first place; and

(2) the … Tribunal were wrong as a matter of law in permitting [Riding] to argue that the fact that it did not take on a majority of the workforce, which was a deliberate decision on the part of [Riding], demonstrated that there had not been a transfer of an economic entity."

Mr Oldham, Counsel for Riding, pointed out in his skeleton, not only that there was at best ambiguity in, and at worst no evidential basis for, the assertion of a 'deliberate decision', whatever that might mean, but further, in paragraph 14(iii) of his skeleton:

"(iii) in any event it has never been suggested that failing to take on employees should lead to a decision that there has been a TUPE transfer. Quite the reverse [Süzen] .. It stands the law on the head to suggest otherwise."

Mr Stafford however did not pursue any ECM point, and, it seems to us, rightly so:

(i) all that appears from paragraph 5(e) of the decision is that during 1997 Riding took the view that the Regulations did not apply.

(ii) In fact, even if it were otherwise relevant, there is no sign of any decision or tactic in relation to arranging that the majority should not transfer, but if anything rather the contrary. The six senior managers were Whitewater senior managers, and no doubt were needed for the purpose of the rest of Whitewater's business, upon which they already spent the majority of their time, and were retained by Whitewater. As to the 14 'core team', seven were taken on, and, as set out above, Riding actually made an offer to the assistant manager Mr Haley, which Mr Haley turned down.

In the light of Mr Stafford's concession, Mr Oldham contented himself with keeping his power dry for what he described as an attack on the ECM point on another occasion.

Conclusion

24. We are satisfied therefore that, although the Tribunal did not carry out the exercise in a way which in our view would have been more appropriate and indeed more helpful, it came plainly to the right conclusion, namely that there was here, on the facts as found, no transfer of undertaking within the 1981 Regulations. The appeal is therefore dismissed, and consideration of Mr Oldham's cross-appeal, relating to which if any employees were assigned to the entity transferred, did not arise.