United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR C DARTON (Of Counsel) Instructed by: Messrs Edward Harte & Co Solicitors 6 Pavilion Parade Brighton East Sussex BN2 1RA
For the Respondent	MR P THORNTON (Of Counsel) Instructed by: James Mead Solicitor 61 Hanover Terrace Brighton East Sussex BN2 9SP

SUMMARY

The intervention by the Law Society, in the practice of a solicitor, pursuant to its powers under Section 35 of the Solicitors Act 1974, does not in all cases have the effect of determining automatically by operation of law the contracts of employment of employees of the practice. The question as to whether or not the employment of an employee has been terminated will depend upon the facts of the individual case.


 


HIS HONOUR JUDGE SEROTA QC

Introduction and Factual Background

1. In this case we have decided that the intervention by the Law Society, in the practice of a solicitor, pursuant to its powers under Section 35 of the Solicitors Act 1974, does not in all cases have the effect of determining automatically by operation of law the contracts of employment of employees of the practice. The question as to whether or not the employment of an employee has been terminated will depend upon the facts of the individual case. Where a practice is transferred, employees will have the benefit of the Transfer of Undertakings (Protection of Employment) Regulations 1981('TUPE').
2. This is an appeal from a Decision of the Employment Tribunal at Brighton (J Simpson Esq) Chairman. The Decision was entered on the Register on 14 April 2004. The Employment Tribunal dismissed the claims by the Applicant and four others, for redundancy payments. Other claims for notice pay, holiday pay and a claim for discrimination were also dismissed. The appeal was referred for a Full Hearing by Beatson J on 28 June 2004. Of the five applicants before the Employment Tribunal the Applicant alone appeals.
3. We say at the outset of this judgement that it is a matter of considerable regret that we have had no assistance from the Law Society or the Office for Supervision of Solicitors. We are aware that intervention in practices of solicitors suspected of dishonesty is not infrequent. The intervention by the Law Society clearly gives rise to employment issues relating to employees of practices subject to intervention. We were told by both parties that both the Law Society and Office for Supervision of Solicitors had been notified of these proceedings. We understand that they were invited to seek to participate but they have not done so. We would have welcomed their participation and assistance and to have learned how the Law Society views the position of a practice subject to intervention and the position of its employees. We would particularly have wished to hear from the Law Society. In this case, and also in another case to which we shall refer later, Barnes and Thomas v Leavesley, [unreported EAT 13/7/00] it would appear that those appointed by the Law Society to carry out the intervention on its behalf, appear to have mistaken the effect of intervention so far as concerned employees of the practice.
4. We did consider adjourning the appeal so that the Law Society could be invited to participate by the EAT. Neither party was enthusiastic for the EAT to adopt that course because they had legitimate concerns relating to the additional expense caused by any delay and a further hearing.
5. The facts are within a relatively small compass. The Applicant, together with the four other Applicants in the Employment Tribunal, were all employees of a small solicitors' firm in Brighton, Reynolds & Dodd. Mr Dodd was the sole principal but we understand employed four salaried solicitors including Andrew Theaker and Christopher Loadsman. Mrs Rose was a conveyancing secretary.
6. On 9 December 2002, without warning, the Law Society intervened in Mr Dodd's practice. The Law Society appointed as their agents to carry out the intervention the firm of Messrs Russell Cooke who attended at the offices. The Employment Tribunal found that employees were told by Russell Cooke to cease all activity and that they were redundant.
7. In fact, staff continued working but not on what might be described as work for which fees could be charged. Such urgent work as needed to be done in relation to clients' affairs was done by Russell Cooke in its own name. However, staff remained to answer the telephone and to assist Russell Cooke, one assumes, to trace documents and files and provide other information.
8. The basis of the intervention was suspected dishonesty on the part of Mr Dodd. It is not material to this judgement for further details to be set out. Mr Dodd challenged the intervention in the High Court. He did so, so he told the Employment Tribunal, for a number of reasons including the protection of the interests of his staff. At the time of his challenge, two of his employed solicitors Messrs Theaker and Loadsman were considering buying his Practice.
9. The Employment Tribunal, in its judgement, had this to say about all of the Applicants:

"The Applicants were all mature, responsible and reasonable people. They accepted the fact of the intervention but were concerned about the interests of the firm's clients and their own futures and offered to assist the intervener to become acquainted with the client files. They had experience of a previous intervention and were aware there could be 'life after death' and were willing to await developments for at least a short period of time. They were aware Mr Dodd was seeking to challenge the intervention and was making an application to the High Court to have it set aside. They were also aware that if this failed 2 employed solicitors (Theaker and Loadsman) were considering taking over the practice if permitted."

See paragraph 6(d) of the extended reasons.

10. We note that Mrs Rose continued working until 24 December and eventually received £400 in cash from the Respondent for the work she had carried out in December. She claimed this was an underpayment.
11. On 20 December 2002 cross applications by the Law Society and Mr Dodd came before Etherton J in the Chancery Division of the High Court. On that day an agreement was made between Messrs Dodd, Theaker and Loadsman which was subject to the approval of the High Court and the Law Society whereby Messrs Theaker and Loadsman acquired Mr Dodd's practice including Goodwill. The agreement records that Mr Dodd has agreed to enter into the agreement:

"In order to safeguard the interests of the Clients, preserve the Goodwill and for the welfare of the Employees…………….."

A Consent Order was also made with a schedule agreed between Mr Dodd and the Law Society, setting out the terms on which its intervention would continue pending the final determination of, inter alia Mr Dodd's application. These terms included a provision whereby Messrs Theaker and Loadsman would send letters in an approved form (attached to the schedule to the Order of Etherton J) confirming they had reached agreement to purchase the goodwill of the practice from Mr Dodd. Messrs Theaker and Loadsman were to practise under the style 'Theaker, Loadsman and Reynolds' and were to satisfy all necessary conditions for the purpose of practising as its principals. Mr Dodd was not to participate in the practice. His agreement with Messrs Theaker and Loadsman provided that if Mr Dodd were not struck off the Roll of Solicitors he would, subject to the imposition of conditions, be restored as a partner or employee of the practise.

12. It is clear that as at 20 December 2002 the Law Society had approved Messrs Theaker and Loadsman taking over the practice in so far as they were able to do so. The Order of Etherton J assumed that a further hearing would take place in January 2003. We have been told no hearing in fact took place.
13. We note in passing that the agreement by Messrs Theaker and Loadsman with Mr Dodd, records that the agreement was made partly for the welfare of employees. This may be said to be somewhat inconsistent with the assertion subsequently made by Messrs Theaker and Loadsman that the staff had all been dismissed as a result of the intervention. We say this, although we note that there is no specific agreement by Messrs Theaker and Loadsman to employ the employees of the Respondent.
14. The Employment Tribunal found that on 23 December 2002 Messrs Theaker and Loadsman informed all employees that they had become redundant on 9 December and they should pursue a claim against Mr Dodd who was trying to arrange funds to pay their salaries for December, as he in fact did.
15. After Christmas Mrs Rose chose not to return to work with the new firm, Messrs Theaker, Loadsman and Reynolds but began work with another firm on 10 February 2003. The four other applicants remained with the new firm. The Employment Tribunal, at paragraph 6(j) found that Mrs Rose continued to perform work at the Hove office until 24 December 2002 and accepted payment from the Respondent of a cash sum of £400 for working during December. The Employment Tribunal record that she asserted she expected to be paid for the work she performed in December both before and after the 9^th, and again complained that the £400 was an underpayment having regard to the amount of work performed.
16. The Employment Tribunal recorded that the other four Applicants remained employed by the new firm, Theaker, Loadsman and Reynolds:

"to whom their employment rights and obligations were transferred."

The Employment Tribunal concluded that none of the Applicants were dismissed as a result of the transfer and therefore the question of redundancy did not arise. This position was the same for Mrs Rose:

"who was not dismissed but chose to leave of her own volition for the reasons confirmed in her evidence."

Mrs Rose had said in her witness statement of 28 September 2003 at paragraph 27:

"27. I left Theaker Loadsman and Reynolds on the 6th January 2003 to take up new employment with another firm of Solicitors in Brighton, …" [our italics]

17. The Employment Tribunal concluded at paragraph 12:

"12. It is clear Mrs Rose regarded herself as employed by the Respondent after the 9^th December as she accepted payment from Mr Dodd for work performed both before and after that date and by the fact she brings a claim asserting an underpayment of wages for this period. Her originating application includes a claim for "salary due" which implies an employment relationship."

18. On 10 January Messrs Theaker Loadsman and Reynolds wrote to the five Applicants including Mrs Rose and informed them that they had been dismissed by reason of redundancy on 9 December 2002 and that they would be offered a new contract for three months which would not operate as a TUPE transfer. As we have recorded the four Applicants apart from Mrs Rose appear to have accepted this position.
19. On 17 January 2003 Mrs Rose received her P45 which apparently bears the date 10 December 2002.
20. On 30 January 2003 Messrs Theaker and Loadsman under the letter heading of the new firm 'Theaker Loadsman and Reynolds' wrote to clients to confirm that they had taken over the former practice of Mr Dodd and that this was deemed to be a succession under Law Society Rules. This letter was approved by the Law Society.
21. It was on those facts and against that background that Mrs Rose claimed that the intervention by the Law Society automatically determined her contract of employment or that she had been dismissed as a result of the events of 9 December.

Automatic Determination

22. Before we consider the judgement of the Employment Tribunal and the parties' submissions we note that the law generally seems to show relatively little enthusiasm for the concept of automatic determination of contracts of employment. Generally speaking where either party to a contract of employment brings about a state of affairs that prevents further performance of the contract, that conduct will be regarded as a repudiatory breach of contract which requires acceptance by the other party to effectively terminate the contract. A repudiatory breach does not automatically determine the contract; see, for example Rigby v Ferodo [1988] ICR 29, a decision of the House of Lords. The circumstances in which contracts of employment are determined automatically seem to be limited to the following classes of cases:

(a) Death of either party is generally regarded as automatically terminating a contract of employment, unless the contract otherwise provides; employment rights are however protected by statute; see Sections 136(5), 206 and 207 of the Employment Rights Act 1996.

(b) Compulsory winding up by the Court is also generally regarded as amounting to

an automatic determination because it is seen to operate as a wrongful dismissal; see for example Chitty on Contracts Volume 2, paragraphs 39-159 and Harvey on Industrial Relations paragraph A2242. The position in relation to voluntary winding up appears to be different in that it does not automatically operate as a dismissal of staff, unless it is accompanied by a cessation of employment. In the case of A Creditors' Voluntary Winding Up, however, employees are entitled to redundancy rights and have been given protection by TUPE; see regulation 4.

(c) he appointment of a Receiver by the Court may also bring about automatic termination of contracts of employment; as appears from Harvey, paragraphs A2243 –51 and Chitty paragraph 39-160, as there would seem to be a wrongful dismissal, although the authorities do not seem to be unanimous. However, the appointment of an Administrative Receiver does not automatically determine contracts of employment because the Receiver will generally be constituted the agent of the Company. Employees again have the benefit of TUPE protection in the case of a transfer by an Administrative Receiver by virtue of regulation 4.

(d) The dissolution of a partnership does automatically bring about the termination of contracts of employment; see the cases cited in Chitty at paragraph 37-58. Employees again have statutory protection whenever there is a change in the constitution of a partnership by S 218.5 of the Employment Rights Act in that their continuity of employment is preserved.

(e) Contracts are automatically determined by frustration; death of an employer may be regarded as an example of a frustrating event. However, many frustrating events in the commercial sense will be the fault of one party or other, so the frustrating event would be regarded as being a repudiatory breach of contract. In actual practice, therefore, situations where a contract can properly be regarded as having been determined by frustration are rare. In any event for the purposes of redundancy a frustrating event would be treated as a determination pursuant to Section 136(5) of the Employment Rights Act 1996.

The Decision of the Employment Tribunal

23. The Employment Tribunal directed itself by reference to TUPE (Transfer of Undertakings) (Protection of Employment) Regulations 1981) together with the cases of Spijkers v Gebroeders Benedik Abbatoir CV (1986) CMLR 296, Suzen v Zehnacker Gebaudereinigung GmbH Krankenhausservice [1997] IRLR 255, Secretary of State for Employment v Spence [1987] 1 QB 179, Litster v Forth Dry Dock & Engineering [1990] 1 AC 546 and Government of Canada v Aronson [1990] 1 AC 579.
24. The Employment Tribunal correctly decided that in its application and interpretation of the TUPE Regulations, the Acquired rights Directive from which they were derived it should:

" …seek to ensure, as far as possible, the rights of employees are safeguarded in the event of a change of employer by allowing them to remain in employment with the new employer on the terms and conditions agreed with the transferor."

In paragraph 9 they had regard to various factors suggested in the Spijkers case and at paragraph 10 concluded:

"10. The Tribunal does not rely on any one factor exclusively but looks at all the facts and circumstances and when viewed holistically unanimously concludes there is an identifiable economic entity (a solicitors' practice) which was transferred and which performs essentially the same thing after the transfer as before. The Tribunal therefore concludes there was a TUPE transfer."

25. As we have noted the Tribunal concluded that Mrs Rose was not dismissed but left of her own volition and indeed regarded herself as continuing in employment by the Respondent after 9 December. Accordingly her claims were dismissed.

Grounds of Appeal

26. The grounds of appeal fall into four separate categories. The first two grounds of appeal argue that in fact the intervention of the Law Society caused an automatic determination of Mrs Rose's contract of employment. These grounds are linked to grounds 5 and 6 in which it is argued that in the alternative, the Employment Tribunal was wrong on the facts to find that employment continued after 9 December 2002. Grounds 3 and 4 are in effect in the alternative and suggest Mrs Rose was dismissed by reason of redundancy by Messrs Russell Cooke. It is said that the Tribunal should have held that they dismissed her pursuant to their powers on intervention under Section 35 and Schedule 1 to the Solicitors Act 1974. We shall refer to these powers shortly. Grounds 7 and 8 are to the effect that the settlement of agreement did not amount to a transfer for the purposes of TUPE. It is said that this is because, even if Mrs. Rose's contract of employment had not been terminated as at the date of the transfer, Mr Dodd's former practice was no longer a going concern.

Intervention by the Law Society in a Solicitors Practice

27. Section 35 of the Solicitors Act 1974 and the powers exercisable upon intervention given under Schedule 1 entitle the Law Society to intervene in the practice of a solicitor suspected of dishonesty. The purpose for which these powers are to be exercised is principally to preserve the funds and papers of a practice for the benefit of clients. Powers exercisable on intervention are set out in Part 2 of the Schedule. There is no specific power to dismiss staff or to carry on the practice in any way. The powers, however, include the general power by paragraph 16 whereby:

"16 The Society may do all things which are reasonably necessary for the purpose of facilitating the exercise of its powers under this Schedule."

The Law Society appoints solicitors to act as its agents to carry out the intervention on its behalf.

28. It is pertinent to note that Rule 13-3 of the Solicitors Practice Rules 1991 requires every

solicitor's practice to be supervised by a solicitor with a valid practising certificate. The effect of intervention in a solicitors practice by virtue of Section 15(1)(a) of the Solicitors Act 1974 is that intervention in a solicitor's practice operates automatically to suspend the practising certificate of the solicitor in question. We note that in the current edition of Cordery on Solicitors there is the following passage at paragraph 1/351:

"The power to intervene in a solicitor's practice is the most powerful weapon which the Law Society can deploy for the protection of the public. A full intervention has the effect of freezing the practice bank accounts and results in the distribution of all client files and papers to clients or successor solicitors appointed by clients. It thus has the effect of closing down a solicitor's practice."

29. It is clear that the effect of intervention by the Law Society in a solicitor's practice is that the practice can no longer practise as such while the intervention is in effect. Its files and funds will have been seized by agents of the Law Society and there will be no solicitor with the appropriate practising certificate able to supervise other members of staff.

Barnes and Thomas v Leavesley

30. We have had the benefit (which was not available to the Employment Tribunal) of the reported decision of J Barnes and C Thomas t/a Barnes Thomas & Co v Leavesley & Others at [2201] ICR 38 EAT, 13 July 2000, a Decision of His Honour Judge Peter Clark. We found this decision to be a model of clarity and of the greatest assistance to us. The facts of that case bear remarkable similarity to the facts of the present case. The Law Society intervened in a practice and the agents appointed by the Law Society made clear to staff that their presence was no longer required and that they would not be paid if they remained at work. However, they might remain voluntarily if they wished to do so. In that case the practising certificates of all partners in the firm in question were suspended. The Employment Tribunal at Sheffield found that the Applicants had been dismissed and were entitled to redundancy payments. The employment Appeal Tribunal having considered the relevant statutory background took the view that the purpose of intervention was to protect clients. The purported dismissal, if there was one, of the Applicants was by agents of the Law Society. They were not the agents of the Respondent and the Respondent had not dismissed its staff.
31. His Honour Judge Clark then went on to consider whether the contracts of employment had been terminated by operation of law. He firstly considered the authorities relating to dissolution of a partnership in which it had been held that the dissolution of the partnership entailed the termination of the contracts of employment of all employees. He then considered cases of compulsory winding up by Order of the Court and noted the possible difference in cases of voluntary winding up. He summarised the law at paragraph 30 as follows:

"30. …If the purpose of the winding up is to discontinue the business, then the winding up should bring about the termination of the contracts of employment of the employees. However, if the purpose is to reconstitute the business under new management the contracts of employment may continue."

He then considered the position in receivership. He noted again that whereas the appointment of a receiver by the Court will terminate contracts of employment of the company's employees, as does the appointment of a receiver out of Court as agent for the company's creditors. However, the more usual appointment of an Administrative Receiver as agent of the company is not inconsistent with continued employment by a company of its workforce. The appointment does not terminate contracts of employment.

32. In the case before His Honour Judge Clark the Respondents submitted that where an intervention resulted in a firm closing down the position was analogous to an unequivocal dissolution of a partnership. However, where in the exercise of its wide discretion the Law Society allowed the partners the opportunity to dispose of their practice as a going concern and they did so without actually dismissing the staff, the intervention did not of itself operate to terminate their contracts of employment. The employment would be transferred to the new owners of the practice in circumstances where a 'relevant transfer' has taken place. In such circumstances there would be no dismissal. The Applicants on the other hand submitted that in circumstances where as a direct result of the intervention the partners' practising certificates were suspended and the Law Society's representatives had told the staff they would no longer be paid, the position was analogous to an unequivocal dissolution of the partnership. Therefore, the effect of the intervention was such as to terminate the staff's employment by operation of law. His Honour Judge Clark concluded (see paragraph 35):

"35 We prefer the analysis of (sic) advanced by Mr Groom (Counsel for the Solicitors). We think that the position is most closely analogous to that of a resolution for the voluntary winding up of a company. The purpose of Law Society intervention is to protect the clients of the firm. It is not to bring about the end of trading by the firm. If it can be sold as a going concern that is all to the good in the interests of the staff and the clients. On the other hand, where the result of the intervention is that the firm ceases trading that will operate to terminate the contracts of employment as a matter of law."

33. In that case the EAT concluded that the findings of fact made by the Employment Tribunal were inadequate and remitted the case to the Employment Tribunal for rehearing. The Employment Tribunal was to determine, inter alia whether the solicitors had dismissed any of the Applicants or whether as a result of Law Society intervention the contracts would terminate by operation of law where there was no dismissal. The EAT also was concerned that the question as to the effect of an intervention on staff's contracts of employment was a matter on which the Law Society might wish to be heard. The Law Society was accordingly given the opportunity to be joined under Rule 17 of the Employment Rules of Procedure.
34. We have seen Extended Reasons of the Employment Tribunal sitting at Sheffield that heard the application after remission by the EAT. It is apparent that the Law Society did not participate in the proceedings although a Mr Miller gave evidence on behalf of the Office of Supervision of Solicitors. In the event the Employment Tribunal concluded on the facts in that case that none of the Applicants had been dismissed either by operation of law or by the Respondent Solicitors.
35. We are of the opinion that we should follow the helpful guidance in the Barnes case unless we are persuaded that it was wrongly decided.

Applicant's Submissions

36. By way of general submissions Mr Darton, who appeared on behalf of the Applicant submitted that the Employment Tribunal never considered what was happening to the practice between 9 December and 20 December and what the Applicant's status was between those dates. The Employment Tribunal, he submitted, did not consider whether the practice was being continued and if so by who. Nor did it consider the intent of the Law Society as to the purpose of its intervention as understood by its agents Messrs Russell Cooke. He submitted that the Employment Tribunal also did not consider the effect of the intervention on the Applicant's contract of employment between 9 December and 20 December when she came in to work voluntarily and they did not consider the effect of the statement by Russell Cooke that all staff were redundant. The Employment Tribunal simply looked at the position on 20 December and asked what was sold and they never investigated the issues that His Honour Judge Clark in the Barnes case suggested needed to be addressed.
37. In relation to his first two grounds Mr Darton submitted that the effect of the intervention was to determine the contracts of employment of all staff of Mr Dodd's practice forthwith. He pointed to Rule 13(2) of the Solicitors Practice Rules to which we have referred which required that a solicitor's practice must be supervised by a solicitor with a practising certificate. The effect of the intervention was by virtue of Section 15(a) of the Solicitors Act 1974, to which we have referred, to automatically suspend Mr Dodd's practising certificate. Mr Darton went on to submit that a solicitor's practice can only operate if a person can lawfully supervise it. In the absence of a solicitor with a practising certificate entitled to supervise the practice it cannot run. He drew attention to the Decision of the Court of Appeal in Hudgell Yeates & Co v Watson [1978] 1 QB 451. In that case a partner in the claimant firm of solicitors had inadvertently failed to renew his practising certificate. A question arose as to whether the plaintiffs were debarred from recovering any part of their claim for costs attributable to work done during the period when he had not had a practising certificate. The Court of Appeal concluded that a lapse of the practising certificate automatically dissolved the existing partnership; thereafter a new partnership came into being by conduct which did not include the solicitor without a practising certificate. Mr Darton relied upon the dissenting judgement of Bridge LJ but we did not find it of assistance on the issues we have to determine.
38. Mr Darton then went on to submit that as there was no principal and no-one to take over the business, it was in effect closed down for good. Mr Dodd was suspended, so as he could not supervise the staff, he could not employ them and thus comply with the requirements of Regulation 13(3). In his submission the practice ceased. It was not simply suspended. He went on to suggest that although it might be possible to restart the practice that would be irrelevant. Subsequent events could not affect the position if the intervention in fact amounted to a dismissal.
39. He then pointed out that Messrs Russell Cooke acted as agents of the Law Society and their powers did not enable them to conduct the practice and on the facts they did not do so. In his submission Messrs Russell Cooke never intended to continue the practice.
40. Mr Darton then went on to distinguish between the position of Messrs Russell Cooke and the position of the Liquidator appointed in a voluntary winding up because Messrs Russell Cooke acted solely to protect clients and neither the Law Society nor Russell Cooke foresaw any sale. There was no question of their 'trading on' to secure a buyer. Trading, therefore, had ceased and there was no-one who could trade. The crucial question was the intention of the intervener. He repeated that one could not judge the nature of the intervention by what happened later because in the interim, he asked forensically, what status did the employees have?
41. In relation to his third and fourth grounds Mr Darton submitted the Employment Tribunal gave no basis for saying that Mrs Rose's employment continued and she must have considered she was redundant but stayed voluntarily. Staff were told they were redundant and it is clear that that would be a dismissal. He submitted that the powers of Messrs Russell Cooke must be sufficiently extensive to enable them to dismiss staff. If, as was not disputed, they were entitled to exclude staff, therefore they could in appropriate circumstances dismiss staff. Such a reserve power was granted to them in paragraph 16 of Schedule 1 to the Solicitors Act to which we have referred. Mr Darton thus submitted that it could not be said that Mrs Rose was employed 'immediately before a transfer' as would be necessary if TUPE were to have any effect. In this regard he referred to the Secretary of State of Employment v Spence [1987] 1 QB 179 and Lister v Forth Dry Dock Co Ltd [1990] AC 546. The dismissal could be one for redundancy and the Respondent would be liable pursuant to Regulation 8(2) of TUPE. In this regard reference was made to Gorictree v Jenkinson [1985] ICR 51, EAT.
42. In relation to grounds 5 and 6 Mr Darton submitted the Employment Tribunal should have found that Mrs Rose's attendance at the office was voluntary and there was no obligation on her to attend or on Messrs Russell Cooke to pay her. Accordingly, there was no mutuality of obligation between herself and either Mr Dodd or Messrs Russell Cooke. Therefore, she was no longer an employee of Mr Dodd. In this regard he referred to the decision of the House of Lords in Carmichael v National Power [2000] IRLR 43 and the proposition that for there to be a contract of employment there had to be a mutuality of obligation between employer and employee. The intervention had destroyed that mutuality.
43. Mr Darton repeated that if Mrs Rose had been dismissed she could not have been employed immediately before the transfer to the new practice. Mr Darton recognised that the effect of this submission was that staff who were employees of Mr Dodd on 9 December would lose TUPE protection when the new firm of Messrs Theaker Loadsman and Reynolds began to practise on 20 December. In relation to his seventh and eighth grounds of appeal Mr Darton submitted that the settlement agreement between Mr Dodd and the Law Society and his agreement with Messrs Theaker and Loadsman did not amount to the transfer of a 'relevant undertaking'. He submitted on the facts that as only files and residual goodwill were involved, the practice was not a 'going concern'. He submitted that for the practice to be a 'relevant undertaking' it had to be a going concern and it was not. Further, contrary to the findings of the Employment Tribunal, the business activities of Reynolds and Dodd did not continue after the intervention because the effect of the intervention was to immediately determine its practice.

The Respondent's submissions

44. As likely expected, Mr Thornton who appeared on behalf of the Respondent submitted that this case was on all fours with Barnes and that we should follow that decision and dismiss the appeal. In relation to the first two grounds of appeal he submitted, following Barnes that we should distinguish between the case where a firm was closed down and the case where the Law Society permits the principals to dispose of the practice as a going concern. Where this was done without dismissing staff as was the case here, there could be no termination of employment so far as staff were concerned. It was irrelevant that the sale or disposal of the practice was not foreseen at the time of intervention. What was significant, he submitted, was what happened subsequently.
45. Messrs Russell Cooke were put in place to protect clients of the firm so they did more than merely safeguard assets and documents. He relied upon the following facts which he submitted were material :

(a) the staff stayed on to await developments knowing Messrs Loadsman and Theaker were negotiating to acquire the practice

(b) The agreement of 20 December was approved by the High Court and the Law Society and provided for transfer of the goodwill of Mr Dodd's practice.

(c) On 23 December letters were sent to clients confirming that Messrs Loadsman and Theaker had acquired the goodwill of the practice

(d) The Law Society was content for the transfer to the new firm to be a succession in accordance with the solicitors' indemnity rules

(e) There was nothing to suggest that Mr Dodd dismissed Mrs Rose.

46. Mr Thornton went on to submit there was no reason why intervention should terminate the contracts of employment of staff. He conceded that had Mrs Rose chosen to treat her contract as terminated she might have been able to mount a case for constructive dismissal but she had not done so. Accordingly, there was no dismissal.
47. In relation to grounds 3 and 4, he submitted that Mrs Rose was not dismissed and we should again follow Barnes. Messrs Russell Cooke were the agents of the Law Society and never the agents of Mr Dodd. They had no authority from Mr Dodd to dismiss staff and they had no power granted to them by the Solicitors Act that enable them to do so. In the absence of some privity between themselves and staff they could not dismiss them. He then referred to Section 136(5) of the Employment Rights Act and submitted that the fact that an employment contract was terminated by the frustrating event was of no assistance in determining the question as to whether intervention by the Law Society in Mr Dodd's practice effected a determination by operation of law. He submitted that even if the practice ceased or if it was suspended, it did not necessarily follow that the employment relationship between Mr Dodd and his staff also terminated. He submitted there was no reason why a secretary could not do some work for a solicitor who did not have a practising certificate. He pointed to the work Mrs Rose and her colleagues in fact did during the intervention.
48. In relation to grounds 5 and 6 he submitted that on the facts Mrs Rose's employment continued after the intervention. He submitted that the practice was serviced by Russell Cooke so it did not cease to trade; although Messrs Russell Cooke did not conduct the practice they were in a position, as he put it, to keep it warm.
49. In relation to grounds 7 and 8 he submitted that the Employment Tribunal correctly asked whether there was an identifiable economic entity capable of transfer. On the facts the Employment Tribunal were satisfied that the solicitor's practice was such an identifiable economic activity having correctly directed themselves in paragraphs 7-11 of its Decision to which we have referred. The practice was a going concern in the sense that it was kept alive even though not practising as such. He pointed out that Russell Cooke had taken over the files and were doing the urgent work, albeit in their own name and the support staff and salaried solicitors continued to work in the premises of the practice and notified interested parties what was happening while giving assistance to Messrs Russell Cooke. The practice was a going concern from 9 December until the date Messrs Theaker and Loadsman took over the running of the practice.

Conclusions

50. Generally speaking we prefer the submissions of Mr Thornton. It is important to stress that Mr. Darton's principal submissions depend on his being able to show that Mrs Rose was dismissed before 20^th December. TUPE only gives protection to those persons 'employed immediately before the transfer' (see reg 5(2)). We do not consider that intervention by the Law Society in a solicitor's practice necessarily terminates the practice. The practice is suspended rather than terminated. There will always be a likelihood, or at least a possibility, as for example, both in this case and in Barnes of the takeover of the practice and amalgamation or even the withdrawal of the suspension. In our opinion the purpose of intervention by the Law Society in the practice of a solicitor suspected of dishonesty is to protect clients. Generally this object will be accomplished by taking custody of the firm's files and monies but it is not inconsistent with that purpose to preserve a practice for a limited period. In our opinion it will be in the interests of clients of the practice that their files should find a home as soon as possible and that there should be at least the possibility of continuity of the persons dealing with their cases and affairs. The limited preservation of the practice for that purpose assists the purpose of the intervention. During the course of discussion we asked Mr Darton whether if the Law Society intervened in a solicitor's practice at 9 o'clock a.m. and by 12 o'clock p.m. had agreed to the transfer of the practice to another firm, it would mean that employees would be deprived of TUPE rights because they were not employed 'immediately before' the transfer. He was constrained to say that as the intervention (in his submission) automatically determined the employment of all staff they would not have the benefit of TUPE protection on the transfer to the new firm.
51. We can see no reason why intervention should necessarily determine employment of staff. In the present case they remained employed by Mr Dodd and we can see no reason why his inability to practise for what might be a limited time should automatically determine their contracts. The point is reinforced by the fact that there was work available to do, the work was done and the Respondent was willing to pay staff for doing it.
52. Clearly, once the Law Society has intervened in a practice and the practice is suspended, there is bound to be a point in time when one can say that it is impossible for there to be a concern capable of transfer. Determination of this issue will always be fact sensitive. Clearly a solicitor's practice will dissolve very quickly, and the staff will accept that they have in fact been dismissed, at least because they will not be paid. Unless a transfer takes place reasonably quickly, the inevitable result will be that the intervention will kill off the practice beyond any form of resurrection. However, on the facts of this case and on the facts of Barnes the Employment Tribunal was perfectly entitled to find:

(a) there was no dismissal

(b) there remained an identifiable economic entity which was transferred and which performed essentially the same thing after the transfer as before. We refer to paragraph 9 of the decision where the Tribunal carefully consider the Spijkers criteria. We would add in relation to the suggestion of lack of mutuality that the suspension of practice for a limited time could not destroy mutuality of obligation between Mr Dodd as employer and his staff. He had no obligation to provide them with work and the fact that his practising certificate was suspended and he could no longer practise had not destroyed the mutuality of obligation. He remained liable to pay them, there was work to be done, and the Applicant and her colleagues did it, and as the Employment Tribunal concluded, Mrs Rose regarded herself as employed by the Respondent after 9 December; see paragraph 12 of the Decision.

53. We are not at all enthusiastic about coming to a conclusion that would deprive employees of TUPE protection whenever the Law Society intervened in the practice of a solicitor. This lack of enthusiasm is reinforced by the fact that it must be the case, (and in the interests of clients) that practices in which the Law Society intervenes are disposed of or taken over fairly quickly, as in the present case and in the case of Barnes.
54. We now turn to consider whether Mrs Rose was dismissed other than as an automatic result of the intervention. We agree with his Honour Judge Clark in Barnes that the intervening solicitors were the agents of the Law Society and had no power to dismiss Mrs Rose or other staff. We are unable to accept that their reserved powers in paragraph 16 of Schedule 1 entitled them to dismiss staff. On the facts found by the Employment Tribunal we do not believe that they purported to dismiss the staff. In our opinion the Employment Tribunal was correct to hold that Mrs Rose and the other staff remained employed by the Respondent after the intervention. The Employment Tribunal found sufficient facts to justify that conclusion which was after all in accordance with Mrs Rose's own understanding.
55. So far as the issue of transfer is concerned in our opinion the Employment Tribunal correctly directed itself. There was ample evidence on which following the Spijkers case the Employment Tribunal was entitled to find there was an identifiable economic entity which was still sufficient of a going concern to attract TUPE protection when the transfer to the new practice took place by reference to staff, premises, business and so on. The suspension of the practice was not sufficient to justify the finding that there had been a permanent cessation of business by the practice as a going concern. We remind ourselves that one of the factors to be taken into account in determining if there is an identifiable economic entity is the duration in interruption to its business; see the well known passage in Spijkers at paragraph 13 considered and applied by the Employment Tribunal at paragraph 9 of their extended reasons.
56. If follows that in our opinion the decision of the Employment Tribunal, albeit without the benefit that we have had of considering the judgement in Barnes, is correct and the appeal should be dismissed.
57. We conclude this judgement by expressing concern at the manner of intervention and the apparent complete lack of concern shown by the intervening solicitors for the rights and concerns of employees of the practice. The Law Society might do well to lay down clear guidelines for intervening solicitors as to how staff in a practice subject to intervention should be dealt with. We repeat our view that the finding of another firm to take over the practice or to facilitate its takeover by for example employed solicitors of the practice, is in no way inconsistent with the duties of the intervening solicitor to protect the interests of clients. Indeed it is likely in most cases to be in clients' interests to preserve continuity of representation. We hope this matter will be addressed in future interventions. As we have said, we are unable to accept the view that intervention in a solicitors' practice per se brings about the automatic redundancy of staff of the practice. Employees might be advised that if the practice ceases and is not transferred within a relatively short period of time the position might be otherwise. We see no reason why staff should not be fully informed of attempts to transfer or dispose of a practice.