United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR DANIEL HOBBS (Of Counsel) Instructed by: Messrs Jameson & Hill Solicitors 72-74 Fore Street Hertford SG14 1BY
For the 1st Respondent	MS LOUISE POVEY ((Nee WEST) THE RESPONDENT (In Person)
For the 2nd Respondent	MISS ELEENA MISRA (Of Counsel) Instructed by: Messrs Longmores Solicitors 24 Castle Street Hertford SG14 1HP
For the 3rd Respondent	MR SIMON BROWN (Of Counsel) Instructed by: J W Godfrey & Company Solicitors 136 High Street Berkhamstead Hertfordshire HP4 3AT

JUDGE ANSELL

1. This is an appeal from a decision of an Employment Tribunal held at Stratford on 8 October 2001 who in a written decision promulgated to the parties on 9 January 2002 unanimously held that there was a relevant transfer within the Transfer of Undertakings (Protection of Employment) Regulations 1981 of the part of the undertaking in which the Applicant was employed - that transfer being to the second Respondents, Wodson Park Sports and Recreation Association.
2. There were subsequent decisions of the Tribunal which resulted in an award to Ms West of £11,410.25 as against Wodson Park Sports and Recreation Association and a further award against her original employers, J West Caterers Ltd of £858.77 in respect of the breach of the TUPE Regulations in connection with consultation. There was a third Respondent Ms Dawn Howard t/a The Greenhouse Café and as a result of these decisions she was effectively dismissed from the proceedings.
3. The facts of the matter are somewhat complicated but it is right that I should set out the key findings before passing to the issues raised before us. The Applicant, Ms West worked for a company known as J West Caterers Ltd who were the first Respondents to the proceedings. Ms West is now married and known as Mrs Povey. I hope she will not mind if I call her Ms West for purpose of these proceedings because that is how she was identified during the case.
4. As the name suggests the company was originally a family company but in 1998 it was sold to new owners. The second Respondent Wodson Park Sports and Recreation Association is a registered charity and owns an area of land comprising some 25 acres and with the assistance of monies that land has been turned into a sports and leisure facility and in particular between 1995 and 1998 the premises were substantially extended and within the extension is a function suite, a bar, a catering area and a new fitted kitchen. There is an area adjacent to the kitchen designated a café or cafeteria to be used for the supply and consumption of drinks and refreshment to visitors on the premises. It is a considerable area and within the whole complex other catering facilities have to be supplied from time to time. The banqueting area can accommodate up to 350 persons.
5. On completion of the building works there was a clear finding by the Tribunal that the charity themselves did not wish to get involved in running their own catering arrangements at this site and initially they entered into a formal licence with a Mr Tomkins trading as Connoisseur Catering who was given the exclusive licence to operate what were described as the catering and refreshment facilities at the Wodson Recreation Centre. There was a formal licence arrangement for a fixed 5 year term giving the licensee exclusive rights to provide catering throughout the whole 25 acre site. The contract provided for the licensee to provide and maintain separate trading accounts, tools and records. Permanent staff would be few in number but when functions were held casual staff would be recruited both in the kitchen and for waiting at table and the licensee Mr Tomkins spent some considerable sums on modifying the kitchen equipment as well as providing for a deposit and indeed there was a formal rent payable for the use of these facilities.
6. After a while Mr Tomkins whose principal business was in fact the supply of catering equipment did not wish to carry on and the second Respondents then contracted with J West Caterers who effectively took over these arrangements. It seems that a licence document was prepared although never signed but the parties assumed that they would operate under the terms of the licence. J West bought the catering equipment directly from Mr Tomkins and there was a schedule of that equipment. Ms West who had already been working for the company became involved in managing this facility and the evidence was that she started to devote about 50% of her time there and towards the end much more, up to 90% and the evidence accepted by the Tribunal was that J West were operating really in the same way as Tomkins had. J West had to take on the obligations to fulfil banqueting arrangements that had been ordered and negotiated with Tomkins as well as new banqueting contracts and they also spent some money on improving the ambience of the café.
7. In particular because of the lack of profitability of that catering facility West were allowed to use the kitchens at Wodson Park to fulfil outside contracts that they had, for instance with the Red Cross in Hertford, and to this end they brought in additional chefs to help out with that work. Wodsons became increasingly unhappy with the quality of service being provided by the new caterers and they decided not to proceed with them having already made contact with a third caterer a Ms Howard who operated locally. She had been operating the Greenhouse Café.
8. The initial approach to Ms Howard was that she would in fact take on a role similar to that of the existing caterers but she was not interested in that role. She also looked at the books and realised the café was not viable even if there were to be no rental payment involved. In paragraph 28 of the decision the Tribunal sets out what were the arrangements between her and Wodson. Firstly Wodson would provide all catering equipment at no cost to her. It would retain the right to use the kitchen for its own purposes and customers would be permitted to bring their own food for consumption on the premises. No rent would be payable. It was an informal arrangement renewable after six months with no requirement for notice. She would not be expected to take on existing staff and staffing would be at her discretion. She would cover staff wages, the purchase of stock and the cost of utilities but all other costs would be borne by Wodson.
9. This arrangement was simply to cover the café and not the functions suite although Ms Howard was free to take on such functions and there was a finding that she took over some of the existing catering functions arrangements that West had been contracted to provide. There were two members of staff who were interested in continuing their employment at Wodson Park with Ms Howard but eventually she only took on one. That was Ms Edwards. Subsequently Ms West was dismissed and the issue arose as to who was responsible for what followed from that dismissal. Issues of transfer of undertaking were then raised and as I have indicated formed the subject in the call of the Tribunal's decision.
10. In terms of their fact finding together their initial approach to the law we can find no fault with the Tribunal's approach and indeed none has been suggested by the parties in the case. At paragraph 30 they refer to the Transfer of Undertaking (Protection of Employment) Regulations 1981 which brought into effect EU Council Directive 77/187/EEC. This purpose was to protect the rights of employees of the transferor employer but providing that the Transferor's rights and obligations arising from a contract of employment or from an employment relationship existing on the date of the transfer should be transferred to the transferee. By virtue of Regulation 3 the regulation applied to a transfer from one person to another of an undertaking situated immediately before the transfer in the United Kingdom or a part of one that is so situated; undertaking is defined by Regulation 2 to include any trade or business.

Regulation 3(4), provides that a transfer of undertaking or part of one may be effected by a series of two or more transactions and may take place whether or not any property is transferred to the transferee by the transferor.

Regulation 5 provides that a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred but any such contract which would otherwise have been terminated by the transferor shall have effect after the transfer as if originally made between the person so employed and the transferee.

11. The Tribunal then in paragraph 33 went on to ask themselves the two relevant questions namely whether or not there was an identifiable business entity constituting the undertaking within the meaning of the regulations and secondly and separately assuming such entity could be determined whether or not there was a relevant transfer and then referred to the guidance given by the President Lindsay J in Cheesman v R Brewer Contracts Ltd [2001] IRLR 144.
12. However, in paragraph 36 the Tribunal set out their conclusions. All parties in this appeal now agree that the Tribunal fell into error in that instead of looking at whether the Transferor namely J West Caterers Ltd transferred an undertaking to another party, they sought to define the relevant undertaking as the activities carried on by Wodson "the whole undertaking with the activity of the second Respondent in the operation of sports and leisure facility; an activity to which were devoted to limited assets in land and buildings operated by an organised grouping of persons. Within that entity was a café and function suites serviced by a fully fitted kitchen and requiring for its operation a management and an unorganised workforce; an entity conveniently referred to as a catering facility."

Their decision

13. The Tribunal concluded that the entity which had been transferred to Ms Howard had a materially different identity in that she had taken a totally different role and a different facility and they concluded as follows:

"The observer would have said that the second Respondent by removing the first Respondent from the site had taken back that which they had granted and that they had then embarked on an entirely different arrangement with Ms Howard whilst hopeful that they would in due course be transferred into her hands the whole entity. It must follow from the foregoing that there was a relevant transfer of an undertaking from the first Respondent back to the second Respondent but no such transfer to the third Respondent."

14. Mr Hobbs for the Appellant argues that firstly the Tribunal failed to properly identify the undertaking in issue namely the business being carried on by the Transferor J West Caterers Ltd being the organisation and provision of catering service in Wodson Parks and further failed to properly consider whether that business had been transferred back to Wodson. Indeed he argues that there was not a single finding of facts within the Tribunal's decision that suggested that Wodson were indeed carrying or intended to carry on any of the catering arrangements on site.
15. Mr Hobbs referred us to a decision of this Court in Whitewater Leisure Management Ltd v Barnes & Others [2001] ICR 1049, a judgment given by the current President Mr Justice Burton, the Court decision was adequately summarised in the head note of that case as follows:

"Two separate questions had to be considered, in term, by a Tribunal when determining whether the transfer of undertakings (Protection of Employment) Regulations 1981 applied namely, whether there was an identifiable business entity constituting undertaking, and if so, whether there had been a relevant transfer of that undertaking; that, in relation to the first question, the entity had to be identifiable as a stable and discrete economic entity, sufficiently structured and autonomous, but not necessarily having assets, and, in relation to the second question, relevant factors were similarity of activity before and after transfer, a transfer of assets or of a brand name or goodwill or a licence to use equipment or assets and whether the majority of employees , or the significant employees in terms of skills, had been engaged by the transferee, and, if appropriate, why certain employees were not taken on by the transferee."

16. That approach followed guidance in the European case of Suzen v Zehnacker [1997] IRLR 255:

"14 In order to determine whether the conditions for the transfer of an entity are met, it is necessary to consider all the facts characterising the transaction in question, including in particular the type of undertaking or business, whether or not its tangible assets, such as buildings and moveable property, are transferred, the value of its intangible assets at the time of the transfer, whether or not the majority of its employees are taken over by the new employer, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer, and the period, if any, for which those activities were suspended. However, all those circumstances are merely single factors in the overall assessment which must be made and cannot therefore be considered in isolation.

15 As observed by most of the parties who commented on this point, 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.

18 The national court, in assessing the facts characterising the transaction in question, must take into account among other things the type of undertaking or business concerned. It follows that the degree of importance to be attached to each criterion for determining whether or not there has been a transfer within the meaning of the Directive will necessarily vary according to the activity carried on."

17. We were also referred to Betts & Others v Brintel Helicopters Ltd and KLM ERA Helicopters (UK) Ltd [1997] IRLR 361. The issue in the case is whether there was a relevant transfer to KLM within the meaning of the regulations when it took over a contract which had previously been carried out by Brintel to provide helicopter services for Shell. The Court of Appeal held that there was not a transfer of undertaking and held that determining whether there has been a transfer of undertaking, there is a distinction between labour-intensive undertakings, such as hospital cleaning services in which the court may conclude the that undertaking has been transferred if the staff combine to engage in a particular activity which continues or is resumed with substantially the same staff after the alleged transfer so that it retained its identity in the hands of the transferee, and other types of undertaking in relation to which the application of the test laid down by the European Courts of Justice involves a more wide ranging enquiry. In that case Brintel's undertaking consisted of helicopters an infra structure including the landing premises and building staff employed in performing the contract and maintenance to support staff, the contract with Shell for the carrying of men and goods to oil rigs and the right pursuant to that contract to land helicopters on oil rigs and use their facilities. Once the undertaking was defined in that way the Court of Appeal held that that although some assets were acquired by KLM such as the right to land and oil rigs and use oil rig facilities, a transfer of such a limited part of the undertaking could not lead to the conclusion that the undertaking itself was transferred so that it retained its identity in the hands of KLM.
18. Applying that guidance all parties in the appeal now agree that there was evidence entitling the Tribunal to come to the conclusion that there had been a transfer back to Wodson of any business entity. As we have already stated there was no evidence before the Tribunal to suggest that Wodson intended to undertake any of the catering facilities that had been previously carried out either by Tomkins or J West and appeared to have come to the conclusion that because Howard had not taken over the contract in a similar form that the business must have been transferred back to Wodson.
19. We move on to consider the second aspect to this appeal namely whether the Tribunal has right to come to the conclusion that there had been no transfer to the third Respondent Dawn Howard. We have already made reference to paragraph 28 of the Tribunal's decision where the arrangements between Ms Howard and Wodson were analysed comparing to the arrangement under the previous contracts. The Tribunal summarised their conclusion in paragraph 41 of their decision thus:

"When the first respondent was excluded from the site, the intention of the second respondent was to ensure, so far as it was able, an uninterrupted catering service to its members and visitors. Had it been able to, Ms Howard would have been persuaded to enter into the very same arrangement as has been made with Mr Tomkins and as had been offered to the first respondent. Had the wishes of the second respondent been achieved, we are likely to have concluded that there was a relevant transfer of part an undertaking to Ms Howard. It was not, however, able to do so and what was agreed with Ms Howard was very different to that which had been agreed with Mr Tomkins and we cannot avoid the conclusion, passed to the first respondent. The arrangement with Ms Howard was one terminable at will, it was not exclusive. It did not include the functions suite or cover the 25-acre site, it involved taking on one member of staff but involved no transfer of assets and the second respondent would provide all the equipment she required."

We have also referred to paragraph 33 when the Tribunal concluded that an impartial observer could not have concluded that the entity retained its identity in Ms Howard's hands.

20. Miss Misra for J West Caterers Ltd attacks the Tribunal's decision by arguing that they placed too much emphasis on the precise legal framework under which Ms Howard was operating as compared to the previous contractors as opposed to asking the broader question as to whether the entity in the hands of Dawn Howard was sufficiently similar to the entity in the hands of J West and in paragraph 20 of her written submissions she highlights a number of similarities in the arrangements between the two contractors.
21. We cannot agree with her argument. We are satisfied that the Tribunal first of all went into some detail as to the comparison of the arrangements that had existed with the previous contractors Tomkins and West as compared to the arrangements that existed with Ms Howard, that comparison had been set out in detail in paragraph 28 of their decision. The Tribunal also considered the law carefully and in particular referred at length to the judgment of Mr Justice Lindsay in Cheesman v Brewer Contracts Ltd. We do not propose to repeat that guidance which was fully set out in the Tribunal's decision. We are satisfied that the Tribunal in this case carried out the overall assessment which the case of Suzen demands and at the end of the day was a matter for the Tribunal having heard evidence to decide whether the various factors of similarity or difference clearly identified were sufficient for them to be able to say that there had or had no effectively been a transfer of an identifiable business entity.
22. That entity as conducted by J West was clearly the provision of total catering facilities on the whole complex involving a number of staff and assets which they had acquired from Tomkins the previous licensee. The Tribunal quite rightly identified the important different features of the arrangements with Ms Howard namely that only one employee was transferred over, there was no transfer of assets involved and her responsibilities were limited to the café area and whilst we have found that the Tribunal fell into error as regards the transfer of an entity to Wodson we are quite satisfied that they did identified the correct factors and carry out the correct balancing exercise when deciding whether or not there had been a transfer of an entity to Ms Howard.
23. We are thus left in the position that we are satisfied that there was no relevant transfer of any undertaking either to Wodson or Ms Howard with the consequence that there must be a further hearing for a new Tribunal to determine the issues between Miss West and J West Caterers Ltd. Those issues as appear from paragraph 20(a) of the form IT1 relate to failing to give reasons for dismissal, holiday pay, wrongful dismissal, unfair dismissal and statutory redundancy pay. We express some regret that these protracted proceedings have left Miss West in the position where she has effectively been put back to the beginning of her claim having expended a considerable expense dealing with the TUPE issues that were effectively outside her control. However we have no alternative other than to remit the matter back to a fresh Tribunal to determine the issues between her and her written employers.