United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR JOE SYKES Representative Employment Cases Direct 8 Bloomsbury Square London WC1A 2LP


 


JUDGE CLARK

1. Mr Ece, the Applicant before an Employment Tribunal sitting at Stratford (under the chairmanship of Mr John Scannell) succeeded in his complaint of unfair dismissal against the first Respondent below, Newham Refugee Centre Ltd (the company), but not against the second Respondent, London Borough of Newham (the council). He was awarded total compensation of £22,870.96, to include unpaid holiday pay. He has no complaint about that award, but he would rather have an order against the Council, not least because, we see in a letter from Interchange Legal Advisory Service to the Registrar dated 30 January 2001, the company has been dissolved. As a result we have 2 appeals before us.

The facts

2. We take this summary of the material facts from the detailed findings of the Employment Tribunal.
3. Newham has one of the largest refugee communities in the country. In early 1995 The Newham Refugee Centre (the Centre) was launched with the support of the Council which provided premises at 728 Romford Road, complete with office equipment, for use by independent voluntary organisations providing assistance to refugees.
4. On 5 December 1994 the Appellant was engaged by the Council under a temporary fixed term 1 year contract of employment as a development worker at the Centre. At about that time a co-ordinator was employed by the Council at the Centre on a similar short-term contract. He was Mr Akwanya. Their contracts were later extended. Whilst so employed the Appellant took his instructions from a manager employed by the Council, Mr Mendes.
5. In the summer of 1995 the Council determined to set up an independent management structure for the Centre. A constitution was eventually agreed in January 1996 and a Management Committee (MC) duly elected at the inaugural Annual General Meeting held in spring 1996.
6. The Centre was registered as a limited company, the Company, and in October 1996 both the Appellant and Mr Akwanya entered into contracts of employment with the Company. Thereafter, the Appellant took his instructions from Mr Akwanya, as his line manager, rather than from Mr Mendes, and Mr Akwanya in turn took his instructions from the Management Committee.
7. The Council acted as a payment agency for the Centre, paying the Appellant's wages. He was now on a permanent contract with the Company. Under that contract he received a 5.5 per cent contribution to his superannuation and ceased to be a member of the Council's superannuation scheme.
8. Whilst the Council continued to provide resources, including the premises, decisions affecting the Centre were now made by the Management Committee. A budget of about £100,000 per annum was allocated to the Centre, to be controlled by the Management Committee, from the Council's resources.
9. It seems that the Council came to the view that the Centre was not being run effectively. Consequently on 1 December 1998 the relevant Council sub-committee resolved to close the Centre by withdrawing its financial and officer support and to tender for a service provider of the refugee service.
10. Before any final steps were taken to terminate the managerial structure at the Centre an incident occurred at the premises on 7 January 1999. At about 9.30 am that morning Mr Suleiman, Chairman of the Management Committee, arrived at the Centre to find certain documents, including notices of an AGM to be held on 10 February. The Management Committee had decided that the AGM would be held on 13 February. He began to collect up these papers, intending to discuss them with Mr Akwanya.
11. The Appellant arrived at the premises at about 10 am. He was angered by what Mr Suleiman was doing and grabbed the papers from his hand. Something of an altercation ensued during which the Appellant pushed Mr Suleiman. As a result of that incident the Appellant was suspended by a letter given to him that afternoon. The Appellant reacted to that by calling the Management Committee members "rats", insisted they had no authority over him and stated that he was a Council employee. He initially refused to leave the Centre and eventually the police were called. He then left.
12. On 12 January 1999 Mr Suleiman wrote to the Appellant informing him that a disciplinary panel would hold a hearing on 22 January. That was followed by a letter from the Appellant's union representative, Mr Gavan and from his solicitors, Christian Fisher. In the event the disciplinary hearing was put off to 1 February.
13. On 1 February the Appellant attended, saw the compositon of the panel, Messrs Warsana and Hersi, both members of the Management Committee, and refused to take part in the proceedings.
14. On 5 February the Management Committee met. Seven members were present. By a vote of 4-3 the Committee resolved to dismiss the Appellant. Mr Suleiman was present and voted with the majority.
15. By a letter dated 9 February the Appellant was informed that he had been dismissed for gross misconduct, namely threatening Mr Suleiman, refusing to take instructions and calling the Management Committee "rats". The Employment Tribunal found that he probably received that letter during the next couple of days and decided that the effective date of termination of his contract of employment with the Company was 11 February 1999.
16. On 24 February 1999 the Council sub-committee met and received a report on the provisions of refugee services in the Borough. At that meeting they agreed a timetable, which was later to slip. The first step was to close the Centre on 5 March. Measures would then be put in place to ensure that services continued to be delivered pending completion of the tendering process.
17. The Centre remained closed from 5-11 March 1999. It then re-opened under the name "Newham Refugee Services". It was run by the council through their employees, Mr Fitzimmons and Mr Farrell. It carried on much as before.

The Employment Tribunal decisions

Liability

18. At the first substantive hearing, occupying 7 days between 16 June 1999 and 10 March 2000 the Employment Tribunal resolved the following issues between the parties, as appears from their reserved decision with extended reasons promulgated on 11 April 2000 (the original decision):

(1) that at the effective date of termination, 11 February 1999, the Appellant's employer was the Company and not the Council.

(2) that, contrary to the Council's submission, a relevant transfer of the Company's undertaking to the Council took place on 11 March 1999.

(3) that the Appellant was dismissed by the Company, not by the Council, and the reason for that dismissal related to his conduct. It was not by reason of the transfer or a reason connected with it.

(4) the dismissal by the Company was both procedurally and substantially unfair.

(5) the claim against the Council failed.

Review

19. On 9 May 2000 the Appellant applied for a review of the original decision. By letter dated 12 May the Chairman Mr Scannell directed that the application be heard by the full Employment Tribunal. Following further correspondence from the Appellant the Chairman considered the matter further. He changed his mind and revoked his earlier direction; instead he refused the application on the grounds that it had no reasonable prospect of success (Employment Tribunal Rules of Procedure rule 11(5)). That refusal, with reasons for it, is contained in a letter dated 12 June 2000 (the review decision).

Remedies

20. A remedies hearing took place before the full Employment Tribunal on 18 October 2000. The Appellant, previously represented by Mr Gavan, appeared in person; the Company did not attend. The Council was not required to attend in light of the original decision.
21. In arriving at their figure for both the basic award and compensatory award for unfair dismissal the Employment Tribunal reduced both awards by 20 per cent to reflect their finding that the Appellant had contributed to his dismissal by his own conduct. There was no so-called Polkey deduction from the compensatory award. We have earlier indicated the total net figure awarded to the Appellant.

The Appeals

22. The Appellant appeals against both the original decision (EAT 1036/00) and the review decision (EAT 1035/00).
23. At this Preliminary Hearing Mr Sykes, now appearing on behalf of the Appellant, advances 3 grounds of appeal, the first 2 in the appeal against the original decision, the 3^rd in respect of the review decision. It is convenient to consider each ground separately.

(1) was the Company the Appellant's employer at the date of dismissal?

Mr Sykes submits that the Employment Tribunal was wrong in law to find that in October 1996 the Appellant's employment with the Council ceased and from that time he was employed by the Company until his dismissal in February 1999.

He relies on certain findings of fact by the Employment Tribunal in support of that proposition which he submits show that the Centre was at all times financed and resourced by the Council, which could withdraw those resources at will, as appears from the sub-committee's resolution of 1 December 1998. The Council did not even lease the premises to the Company. He describes the contract of employment made between the Appellant and the Company in October 1996 as little more than an expression of the corporate veil erected by the Council. He asks us to pierce that veil.

We reject that submission. It frequently happens that a commercial organisation will arrange its affairs so that there is a holding company with wholly-owned subsidiaries including a service company which employs the workforce. In such circumstances it is the service company not the holding company which is the employer.

So it is in this case. The Council decided to set up a limited company to run the Centre, through its management committee. That company entered into a genuine contract of employment with the Appellant. The Council acted as paying agent for wages purposes. In these circumstances it was open to the Employment Tribunal to conclude that from October 1996 until the effective date of termination in February 1999 the Appellant was employed by the Company and not the Council.

(2) was there a transfer in stages between 1 December 1998 and 11 March 1999 as envisaged in Regulation 3(4) of the TUPE Regulations 1981?

Mr Sykes contends that following the sub-committee resolution of 1 December 1998 the Employment Tribunal found these facts, that in January 1999 the Council decided to manage the Centre staff directly (reasons paragraph 25) and took over the administration of tenants (paragraph 27).

In these circumstances he submits that the Employment Tribunal ought to have found that this was a transfer in stages beginning with the Council's resolution 1 December 1998 and that accordingly the Appellant was as a result of that transfer employed by the Council prior to the effective date of termination in February 1999.

We think there are 2 problems with that submission. First, Mr Sykes accepts that the question of a transfer in stages under regulation 3(4) was not raised before the Employment Tribunal. That certainly fits in with our reading of the originating application and in particular paragraph 43 of the particulars of complaint attached to the originating application where it is contended that the relevant transfer took place on 9 March 1999 and also conforms with the Employment Tribunal summary of the submission made on this issue on behalf of the Appellant by Mr Gavan at the original hearing – see paragraph 29 of the original decision reasons.

In these circumstances we have considered whether we can entertain this new point on appeal. We think that we should not. No exceptional circumstances for allowing the new point to be taken had been advanced before us and we bear in mind the recent Court of Appeal guidance on allowing new points to be taken particularly in Jones v Governors of Burdett School (1998) IRLR 52.

That is particularly so where it is clear from Mr Sykes' submissions that more precise findings of primary fact as to what occurred in January 1999 would be required from the Employment Tribunal so that if the new point succeeded that would inevitably result in remission to the Employment Tribunal.

However, leaving aside that procedural problem we can see nothing in the point anyway. It seems to us quite clear on the Tribunal's findings of fact that there was here a relevant transfer, contrary to the argument advanced by the council and that it took place on 11 March 1999. Reference has been made to the Employment Appeal Tribunal decision in London v Ferrari Ltd (1994) ICR 443 and we have also been referred to the Court of Appeal decision in Dines v Initial Health Care Services Ltd (1994) IRLR 336. Having considered those cases it seems to us that this was not a transfer by a series of transactions. The transfer was not affected before the very earliest closure of the Centre on 5 March which post-dates the effective date of termination.

(3) The review decision

Mr Sykes raises an interesting procedural point. He submits that the Chairman's decision to revoke his earlier direction that the Appellant's review application should be heard by the full Employment Tribunal was one made without jurisdiction.

Leaving aside the merits of the review application, it seems to us, looking at the scheme of rule 11 of the Employment Tribunal Rules of Procedure, that where a party to proceedings in which the full Employment Tribunal reaches a decision applies for a review of that decision the Chairman, acting alone, has power to do one of two things; either he refuses the application under rule 11(5) or if not he directs that it be heard by the full Employment Tribunal under rule 11(6).

In this case, the Chairman initially proceeded along the rule 11(6) route and then changed his mind and purported to dismiss the application under rule 11(5). Can he do so?

We have not come across this situation before and therefore we must consider the rules.

The first question is whether the Chairman's direction under rule 11(6) is itself a decision or an interlocutory order excluded from the definition of "decision" under Regulation 2(2) of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 1993, to which the Rules of Procedure are annexed at Schedule 1.

If it is itself a decision, then it is reviewable under rule 11. To be reviewed first, one of the grounds under rule 11(1) for review must exist; none are clear from the Chairman's review decision here; secondly, since this was a review by the Chairman of his own motion, notice must be sent in accordance with rule 11(3). That was not done in this case.

Alternatively, if it is an interlocutory order short of a decision, then the order may be revoked, but natural justice normally requires notice to be given to the parties. See Peter Simper & Co Ltd v Cooke (No 1)(1984) ICR 6. First there is a preliminary question to whether or not the Chairman fell into error by failing to give the Appellant notice of his intention to consider revocation of the rule 11(6) direction. Secondly, there is a real argument as to whether or not having gone the rule 11(6) route the Chairman then had power to revoke the direction that he had given or whether the full Tribunal was seized of the matter and was itself obliged to make a decision on the review application and in particular whether the restriction contained in rule 13(8)(c) applies in these circumstances preventing the Chairman alone carrying out the review of a decision under rule 11.

24. It seems to us that these are arguable points going to the validity of the course taken by the Chairman in altering his original direction. In these circumstances we shall allow the appeal against the review decision (EAT 1035/00) to proceed to a full hearing at which the Council may attend and make representations. The appeal against the substantive original decision EAT 1036/00 is dismissed for the reasons given earlier. In appeal EAT 1035/00 we shall direct that the case be listed for half a day, Catetory B. There will be exchange of skeleton arguments between the parties not less than 14 days before the date fixed for the full appeal hearing. Copies of those skeleton arguments to be lodged at this Tribunal at the same time.