United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE APPELLANT


 


MR RECORDER LUBA QC:

Introduction

1. There is before us, for preliminary hearing, an appeal brought by Mr John Clay against the decision of the Manchester Employment Tribunal, following a hearing on 27 November 2002. The particulars of that decision are set out in extended reasons sent to the parties on 10 January 2003.
2. The matter before the Employment Tribunal was a complaint by Mr Clay that he had been unfairly dismissed. The Tribunal's conclusion after the hearing of that matter was as follows:-

"i. the applicant's complaint against the first respondent, Stuarts Limited, is dismissed.

ii. the applicant was unfairly dismissed by the second respondent, Stuarts Property Services Limited.

iii. the applicant is awarded compensation in the sum of £1,375."

3. On receipt of the grounds of appeal by the office of the Employment Appeal Tribunal, it was not immediately apparent which of the three decisions of the Manchester Employment Tribunal Mr Clay was seeking to upset. By letter dated 8 April 2003 he indicated that he sought to upset those decisions we have numbered above, as numbers "i" and "iii". Therefore, he was disputing, or wishing to dispute by way of this appeal, not only the amount of compensation awarded to him in respect of his unfair dismissal, but, also the dismissal of his claim against the first respondent, Stuarts Limited. He wished the Appeal to proceed, therefore, in respect of both the original respondents.
4. The appeal in respect of the second respondent (concerning the amount of compensation) has already been directed to go forward for a full hearing. This preliminary hearing is concerned only with the issue of whether or not the appeal should proceed against the first respondent, Stuarts Limited, in addition to a proceeding against the second respondent. We must observe that it does not appear from the correspondence that the EAT office has received from Mr Clay, that he fully appreciated that this was the sole purpose or function of this preliminary hearing.
5. Mr Clay was provided with an order of this Employment Appeal Tribunal containing directions for the preparations that he should make for this preliminary hearing. Sadly, he has not felt able to comply with those directions, beyond supplying us with a letter which, put shortly, repeats and adopts the original grounds of appeal and seeks to deal very shortly with his understanding of the merits of his general case. In those circumstances we have had to consider unassisted and for ourselves whether it is right that this appeal should go forward in respect of an appeal relating to the first respondent. In order to deal with that matter it is necessary to say something more about the background circumstances.

Background

6. Mr Clay was employed as a Portfolio Manager by the first respondents, Stuarts Limited, and he had been in their employment since 11 December 2000. In 2002 steps were taken towards a buyout of the business of Stuarts Limited, by a new company, the present second respondent. The arrangements between the first and second respondent ultimately culminated in a transfer of the undertaking from the first respondent to the second respondent. That transfer was formally concluded on 1 July 2002.
7. A matter of a few days before it was concluded, on 27 June 2002 (which was a date after the exchange of contracts between the two companies or organisations) Mr Clay was dismissed. It is in respect of that dismissal that he claims compensation for unfair dismissal. A preliminary question, therefore, for the Employment Tribunal was, "which employer had dismissed him?" That matter is not dealt with at all on the face of the extended reasons of the Tribunal. It appears to have been common ground that the dismissal occurred on 27 June 2002, before the actual legal transfer was concluded, and was a dismissal of the appellant by the first respondents', Mr Stephen Murray. Mr Murray made it clear that the dismissal was pursuant to the instruction of a Mr Hayes on behalf of the second respondent.
8. As we have already indicated, this was a transfer of undertaking to which the provisions of the well-known Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE") applied. The Tribunal directed themselves accordingly.
9. The first question for the Tribunal was whether the dismissal was a dismissal caught by Regulation 8(1) of the Regulations, that is a deemed unfair dismissal because the reason for dismissal is connected with the actual transfer. The Tribunal concluded that the terms of Regulation 8(1) were satisfied. However, the Tribunal then went on to find that the conditions in Regulation 8(2) were also satisfied. That is, that there had been an economic, technical or organisational reason entailing changes in the workforce of the transferee and that that had been the reason or principal reason for dismissing the employee.
10. In those circumstances the question of whether the employee had been unfairly dismissed was at large. The Tribunal then went on to conclude that the dismissal was, in fact, an unfair dismissal, applying the usual provisions of the Employment Rights Act 1996 because there had been a failure of consultation by the employer before dismissing.
11. On the crucial question as to which employer had dismissed, or by whom compensation should be paid, the Tribunal simply said at paragraph 22 of their extended reasons as follows:-

"Since there was an indemnity entered into by the second respondent in respect of any award that may be made in an Employment Tribunal against the first respondent, the Tribunal considered it inappropriate to make any such award against the first respondent and therefore the applicant's complaint against the first respondent is dismissed."

This Appeal

12. Mr Clay, as we have indicated, wishes to appeal against that dismissal of the claim that he brought against the first respondent. On the face of it, the matter would seem somewhat academic in the light of the Tribunal's reference to the existence of an indemnity. But, for the reasons that the Tribunal have themselves given, this is not a case in which the indemnity can operate. The indemnity only bites if the Tribunal made an award against the first respondent and, in the event, they did not make such an award. The only award made was an award made against the second respondent. Therefore the question of the indemnity does not come into play or at least that is how, as matters presently stand, it appears to us.
13. The Tribunal does not appear to have dealt with the important question posed by Regulation 5 of TUPE regulations, as to which employer would be the right employer to be held liable in respect of the unfair dismissal. Regulation 5(1) of the 1981 Regulations provides so far as material 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 … but any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee."

14. The effect of Regulation 5(1) therefore is to deem the employee to be the employee of the transferee. It is further provided by Regulation 5(2) that the rights and obligations under the contract of employment transfer from the transferor to the transferee but, further, that at 5(2)(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."

15. On one reading of Regulation 5(2)(b), therefore, the new employer or transferee is bound by the dismissal, unfair or otherwise, of the transferor. However, Regulation 5(3) further provides:-

"Any reference in paragraph (1) or (2) above to a person employed in an undertaking or part of one transferred by a relevant transfer is a reference to a person so employed immediately before the transfer, including, where the transfer is effected by a series of two or more transactions a person so employed immediately before any of those transactions."

The wording of Regulation 5(3), in our view, begs the question of whether the Tribunal in this case found that Mr Clay was a person employed by the first respondent immediately before the transfer.

16. That is a question of some importance in this jurisdiction. Although it seems that, as a matter of fact, the dismissal was directly connected with the transfer, the dismissal took place, as we have indicated, a few days before the transfer was perfected. In order to avoid this providing a loophole in the TUPE Regulations, the jurisprudence on this issue is such that Regulation 8(1) "deemed unfair dismissals", are deemed to be unfair dismissals by the transferee where the dismissal takes place shortly before the transfer. However, for the reasons we have given, this Tribunal found that Regulation 8(2) was made out and therefore this was a not a deemed automatic unfair dismissal.
17. That poses the question of whether a non-automatically unfair dismissal made in the lead up to a transfer immediately triggers satisfaction of the Regulation 5(3) requirement, and, indeed, how it bites in a case to which Regulations 5(1), and/or, 5(2) apply. This is a matter which has been considered by this Employment Appeal Tribunal in Kerry Foods Ltd v Creber [2000] IRLR 10 and in Thompson v SCS Consulting Ltd & Others [2001] IRLR 801. Having regard to that line of case law and the issue that arises on the interpretation of Regulation 5 read with Regulation 8, we are satisfied that it is at least arguable that the correct respondent to the appeal and, indeed, the correct respondent to the claim of unfair dismissal, is the first respondent. We are strengthened in that view by the equivocal manner in which the two respondents below resisted the application for unfair dismissal. In the response of the first respondent, it is said at paragraph 8 that:-

"The Respondent believes that by the operation of law, and in particular Regulations 5(1) and 5(3) of the Transfer of Undertakings (Protection of Employment) Regulations 1981, the Applicant was dismissed by Stuarts Property Services Limited."

In other words, the first respondent was contending that the claim for unfair dismissal fell against the second respondent.

18. The second respondents for their part, however, by their Notice of Appearance have put their case as follows at paragraph 3:-

"The Respondent's case is that:-

(i) the Applicant was dismissed by Stuarts Limited [the first respondent] on 27 June 2002;

(ii) the Applicant was dismissed by the Respondent by virtue of Regulation 5 of the 1981 Regulations."

As we have already indicated, it appears to us, at least on the face of it, that the Tribunal failed to resolve the question of who was, as a matter of law, the proper respondent to the claim for unfair dismissal.

19. For the reasons we have given, we do not believe that the comprehensive answer to that point is given by the reference, in paragraph 22 of the extended reasons, to the indemnity. For all these reasons, it seems to us proper that this appeal should go forward and be joined with, and heard with, the appeal in respect of the second respondent, and we so direct. We further direct that because this judgment is being delivered in the absence of any of the parties, a transcription should be made and sent to all three parties, that is, to the appellant and to the two respondents.