United Kingdom Employment Appeal Tribunal

APPEARANCES

EATS/0067/03

 

For the Appellants	Mrs D Illius, Counsel Instructed by- Messrs McVey Murricane, Solicitors 13 Bath Street GLASGOW G2 1 BW
For the 1st Respondents For the 2nd Respondents For the 3rd Respondents	Ms J Brown, Barrister Instructed by- Messrs Rowley Ashworth Solicitors 247 The Broadway Wimbledon, LONDON SW19 1SE Miss M Tether, Counsel Instructed by Messrs Brechin Tindal Oatts Solicitors 48 St Vincent Street GLASGOW G2 5HS Mr Mr G Pennel, Solicitor Of- Messrs Maclay Murray & Spens Solicitors 3 Glenfinlas Street EDINBURGH EH3 6AQ

APPEARANCES

EATS/0068/03

For the Appellants	Ms J Brown, Barrister Instructed by Messrs Rowley Ashworth Solicitors 247 The Broadway Wimbledon, LONDON SW19 1SE
For the 1st Respondents For the 2nd Respondents For the 3rd Respondents	Mrs D Illius, Counsel Instructed by Messrs McVey Murricane, Solicitors 13 Bath Street GLASGOW G2 1 BW Miss M Tether, Counsel Instructed by- Messrs Brechin Tindal Oatts Solicitors 48 St Vincent Street GLASGOW G2 5HS Mr G Pennel, Solicitor Of- Messrs Maclay Murray & Spens Solicitors 3 Glenfinlas Street EDINBURGH EH3 6AQ


 


LORD JOHNSTON:

1. This dispute arises out of the circumstances surrounding the mothballing of a firing range facility at West Freugh in Galloway owned and hitherto operated by the Ministry of Defence. The first respondents which are a commercial company but wholly owned by the Ministry of Defence, operated the facility using the employees of the second respondents, who did not make any appearance before this Tribunal, the reason for that being that parties were agreed that they should be dismissed from the proceedings. The complaints made by the appellant unions related to the extent to which consultations did or did not take place in the context of a relevant transfer between the second respondents and the first respondents in terms of The Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE") in respect of the final act in the drama which was the closing down of the facility and the making of the relevant employees, having been transferred to the first respondents, redundant.
2. The Tribunal conveniently summarised the background facts on page 3 of their decision as follows:-

"During the period April 2001 - July 2002 the first respondents in terms of their contract with the Ministry of Defence were carrying out certain functions at West Freugh. In this connection, they had entered into or "inherited" (we are not quite sure which) a contract with the second respondents in terms of which the second respondents carried out similar functions at the same facility. During the same period the first respondents took the decision to terminate their contract with the second respondents. They did so for a number of reasons, only one of which was the desire to effect economies, all as set out in Mr Denyer's statement. Before and when the first respondents took the decision to terminate their contract with the second respondents, both respondents were aware that, if the contract was terminated, Tupe would apply, and the first respondents would have no choice but to take on the work force of the second respondents based at West Freugh on the same terms and conditions as the second respondents work force enjoyed with the second respondents. The first respondents therefore, only anticipated saving the management fee that they required to pay to the second respondents, if they were to terminate the contract with the second respondents. At the point in time when the decision to terminate the contract with the second respondents was taken, the first and second respondents were competitors, and it simply did not make commercial sense to the first respondents to have the second respondents on site bearing in mind that both companies were quite likely to be in competition for contracts with the Ministry of Defence to be executed at that site. In addition, the first respondents believed that it would be easier to manage certain health and safety issues (matters of paramount importance in the respondents' business), if there was only one company in charge of matters at West Freugh. It is also important to note that the decision to terminate the contract with the second respondents was a decision taken solely by the first respondents and one with which the Ministry of Defence was in no way involved."

3. Before the original Tribunal, issues were taken in both respect of the application of Regulation 10 of TUPE, and, also, as to whether or not the applicants were entitled to enforce the terms of the Council Directive 2001/23/EC ("The Directive"), directly against the first respondents.
4. The only evidence came from an employee of the first respondents whose comprehensive witness statement was produced before us, and, although, initially, its relevance or application was said to be contentious, by the end of the hearing both parties were referring to it. In any event, he gave evidence before the Tribunal who so record. One salient fact which would be highly important but which is not clear as far as the evidence and the findings of the Tribunal are concerned is when, if at all, the MOD informed the first respondents prior to the transfer that redundancies and closure under the heading of rationalisation was contemplated, and, if all other things had been equal, this would have caused us some concern. As will, however, be seen, the matter can be decided without reference to any factual decision in that context.
5. The issues raised by Regulation 10, which was decided by the Tribunal against the appellants, were not reiterated before us, save when it came to any comparison between the terms of those Regulations and the Directive. The debate before us therefore concentrated upon the claim in respect of the Directive which is in the following terms that are relevant:-

""1. The transferor and transferee shall be required to inform the representatives of their respective employees affected by the transfer of the following-

the date or proposed date of the transfer,

the reasons for the transfer,

the legal, economic and social implications of the transfer for the employees,

any measures envisaged in relation to the employees.

The transferor must give such information to the representatives of his employees in good time, before the transfer is carried out.

The transferee must give such information to the representatives of his employees in good time, and in any event before his employees are directly affected by the transfer as regards their conditions of work and employment.

2. Where the transferor or transferee envisages measures in relation to his employees, he shall consult the representatives of his employees in good time on such measures with a view to reaching an agreement.

3. ......................

4. The obligations laid down in this Article shall apply irrespective of whether the decision resulting in the transfer is taken by the employer or an undertaking controlling the employer.

In considering alleged breaches of the information and consultation requirements laid down by this Directive, the argument that such a breach occurred because the information was not provided by an undertaking controlling the employer shall not be accepted as an excuse.

5. ..........................."

6. The Tribunal determined the matter against the appellants on purely one issue against a background of certain assumptions which became issues before us. The determinative issue as far as the Tribunal was concerned turned on a construction of the phrase "any measures envisaged in relation to the employees" and in this respect the decision of the Tribunal is in the following terms:-

"We are persuaded that there must be some limitation placed on the matters that are required to be subject of consultation in terms of the Directive. Patently every single measure that an employer envisages in relation to every single employee whether connected to the transfer or not cannot be the subject of consultation, and there must be some limitation on the breadth and scope of the required consultation. Sub Article 1 is telegraphic in its style and, in our view, sets out the general objective to be achieved and is not to be interpreted in the manner in which an Act of the United Kingdom Parliament falls to be interpreted.

In our view, there is another reason for refusing to give to the Directive the interpretation argued for by the applicants. If we continue the assumption that the respondents are an emanation of the state, and that the applicants may rely on the Directive, by parity of reasoning, the applicants could rely on Council Directive 98/59 ("the 1998 Directive.") That Directive provides in Article 2 that, where "an employer is contemplating collective redundancies, he shall begin consultations with the workers' representatives in good time with a view to reaching an agreement." As we understand the matter, the expression "contemplates" is to be given a meaning identical with that of the word "envisages." The relevant part of the 1998 directive reads "Lorsque un employeur envisage..................". We are far from persuaded that the current controversy about whether the words "contemplate" and "envisage" are truly synonymous with the word "propose" (and they probably are not) matters, because whether an employer contemplates, envisages or proposes redundancies, the obligation is to consult "in good time." Thus an employer who is contemplating or envisaging redundancies, but not proposing them, may delay the commencement of consultation, provided he carries out the consultation "in good time" and, in our view, the "good time" is to be calculated by reference to the date upon which the redundancies are to take effect rather than by reference to the date upon which the germ of the idea of redundancies first entered the employers' mind or - at the very least - the date upon which the redundancies are to take effect is a relevant factor in determining whether consultation has begun "in good time." The basic point - and the relevance to our reasoning - is that the 1998 Directive (assuming that it can be directly enforced) imposes the obligation on state employers of consulting in good time (and not as soon as is reasonably practicable as did the Employment Act 1975.) As far as we are aware, the applicants have not complained - at least in a formal sense - to an employment tribunal - either in terms of section 188 of the 1992 Act or of the 1998 Directive that the consultation that presumably followed the announcement of 23rd July and which resulted in the first compulsory redundancies in March 2003 did not commence "in good time." If we were to give effect to the applicants' argument, we would, in practical terms, be laying down that consultation, at least in the specific circumstances of this case, ought to have begun before "good time" required them to begin. The employees affected by the transfer would, therefore, be in a better position than if the transfer had not taken place, and, in our view, it cannot have been the intention of the 1998 Directive to place employees affected by a transfer in the position that they could demand that consultation concerning redundancies should begin in more than good time.

Accordingly, we are satisfied that the words "in connection with the transfer" are implicit in the Directive and in these circumstances dismiss the applications.

7. As can be seen, the Tribunal determined the matter on the basis that it was appropriate to read into the relevant phrase in the Directive a further qualification "in connection with the transfer". They then went on to determine that there was no such connection on the same basis that they had determined the issue with regard to TUPE with particular reference to the decision of Institute of Professional Civil Servants v The Secretary of State for Defence [1987] IRLR 373 ("the Dockyards case"). They thus offered no further views on the question of whether or not, as is essential if a Directive is to be enforced specifically against an individual entity in this country, that the relevant entity is truly an emanation of the State and we will require to consider this matter which must be resolved in favour of the appellants to enable them to succeed. There were also subsidiary arguments presented to us as to the enforceability of the Directive on the grounds that it was too vague, if the qualifying phrase was not read in, as to be capable of enforcement. There was a further subsidiary argument in relation to EC Commission of United Kingdom of Great Britain and Northern Ireland [1994] ICR 664 ("the EC case") in which the European Commission challenged the British Government in the Luxembourg Court as to whether or not it had properly enforced the Council Directive in relation to TUPE. The Court made certain findings against the Government but the argument presented to us proceeded on the basis that what they did not do was to suggest or state that Regulation 10 did not reflect the aims of the Directive, and, it is to be noticed at once, and this was the core of the argument, that in regulation 10 the phrase "in connection with the transfer" is written in. The argument in this respect was simply if that was a correct transposition of the requirements of the Directive then the Directive itself must have contemplated the same qualification. We shall return briefly to that matter.
8. However, our approach to the issues before us differs from that of the Tribunal, inasmuch that, because of the concerns we have in fact, to which we have made reference, we would not be happy to decide the matter upon the basis that there was no connection in fact between the ultimate redundancies and the original transfer, assuming the Directive should be qualified as argued for. We will therefore put this matter to the rear of our considerations.
9. To our mind the most important consideration is the issue of "emanation of the State" with regard to the enforcement of a Council Directive directly against an individual entity within the United Kingdom. Without such being established in relation to that entity the exercise cannot be achieved as a matter of law.
10. The leading case is Foster v British Gas plc [1991) ICR 84. In that case, the House of Lords made a reference to the European Court of Justice for guidance as to how to apply the Directive in the context of direct application and the advice of the European Court in this respect was as follows:-

"It follows from the foregoing that a body whatever its legal form which is made responsible pursuant to a measure adopted by the State providing a public service under control of the State and has for that purpose special powers beyond which result from normal rules applicable in relations between individuals, is included among the bodies against which the provisions of a Directive capable of having direct effect may be relied upon."

11. This is sometimes referred to as the tripartite test but, however defined, it is clear that in respect of Foster what is required is the body against whom enforcement is directed exists pursuant to a measure adopted by the State, is performing a public service and has special powers in that respect to carry out such an exercise.
12. In the present case, Counsel argued that the running of a Ministry of Defence facility by a contractor wholly owned by the Ministry of Defence, which was a State entity, was the performance of a public service pursuant to a measure adopted by the State. Counsel further went on to argue that the idea of special powers was merely illustrative rather than mandatory and was not conclusive if they could not be found. Miss Tether, appearing for the respondents before us, argued succinctly that the existence of special powers was essential to the exercise, and, in any event, properly understood, what the contractor here was doing was not performing a public service. It was merely a commercial company carrying out a commercial exercise for gain as an agent for the Ministry of Defence in the sense that any contractor is an agent. As an example of what could be special powers, she referred us in the context, to Griffin v South West Water Services Ltd [1995] IRLR 15 and the powers listed there, by way of example.
13. We should say that reference was also made to Wilson & Others v Havering College of Further and Higher Education [2001] IRLR 738 as to the question of "a public service or body". The situation in that case was said to be distinguishable from the present one, as a matter of fact.
14. We regard this issue as going to the core of this case and we sought guidance from Counsel on both sides as to what should be regarded as, or a definition of, special powers, taking the view as we did that, having regard to the advice of the European Court, the existence of such is essential if the notion of emanation of the State is to be established. We should say in passing that we have considerable doubts as to whether or not at the time of the transfer the contractor here, that is to say the first respondents, was carrying out anything more than a normal commercial operation which happens to be instructed by the State as owners (Doughty v Rolls Royce plc [1992] IRLR 126). However, our determination of the matter returns to the issue of special powers.
15. We consider that it is axiomatic that "special powers" in the context of a body acting on behalf of the State in performing a public service, and which are defined as in addition to what individuals might have against each other, must be imbedded in a statute. We do not see how the common law could give additional powers to an entity which it would not have as an individual when dealing with another individual. Therefore, to ascertain the existence of special powers, one must look to the statute which creates the service and the body performing it on behalf of the State. That is precisely what was done in Griffin supra and it is easy to see where the powers there were given to the water authority to enable it to carry out its tasks, none of which would have been available to them at common law that the test is satisfied. It is to be noted that in his witness statement, and, presumably in his evidence, the witness, Denyer, made it clear that the contractor as such had no special powers in performing the duties in relation to the range. Counsel made some attempt to suggest that there must be such implicit in the whole exercise of firing weapons, if not in a public place, at least publicly in the sense of in the open air but we consider that would amount to speculation .
16. Therefore, we have come to the view that the law requires there to be the existence of special powers in the hands of the relevant entity against whom the Directive is being enforced, in order to carry out the public service, to admit such enforcement and such are not to be found in the present case, on the evidence or for ought seen as a matter of law.
17. Accordingly, the assumption, which the Tribunal made in this respect, is erroneous in law and this result defeats the whole exercise without reference to the other submissions made to us.
18. We do however have to offer views in that respect.
19. With regard to the issue of construction of the Directive, we note that in the Dockyard case, Millett J expressed the view that the qualification "in connection with the transfer" was probably implicit in the Directive and this view is certainly to some extent enforced by the silence in the EC case in the context of Regulation 10. On the other hand it is also to be noted that in Regulation 10(2)(b) and in Article 1 of the Directive , the phrase "legal economic and social implications of the transfer for the employees" is to be found. That lends a view to the fact that "special measures" may be contemplating broader issues not necessarily connected with the transfer. On this view, if it is known before the transfer by the transferee, that, as a result (our emphasis) a certain consequence such as redundancies will flow, it is hard to see that they do not contemplate the notion at least of social and economic consequences. This supports the wider contention in relation what is meant by "special measures".
20. In the final analysis, however, we were inclined to favour the view of the Tribunal that given the context, namely, transfer of undertakings, it is unrealistic, and, indeed, unsatisfactory to leave the phrase "special measures" so all-embracing requiring no qualification and we would therefore support the reasoning of the Tribunal in this context to give a degree of clarity and specificity to the enactment in which case the matter of what was "envisaged" with regard to redundancies becomes a question of fact which, we, unlike the Tribunal, would not have been prepared to resolve in the present context because of the state of the evidence. Thus if this was the only issue we might have had to call for further investigation.
21. However, in the assumption that we are wrong in that respect with regard to the qualification, we are entirely persuaded that, if left in its general form in this respect, i.e., the phrase "any measures envisaged" without qualification is far too vague to be capable of direct enforcement in the general context of the limits to which a Directive may be enforced against an individual entity within a Member state. Without qualification, it is our clear opinion, given the need for clarity in advance of any particular attempt to effect an enforcement, it is essential, that the so-called defaulting party should know in advance at least in general terms what he or she should do or has not done and without such the matter becomes impossible of enforcement.
22. In the final analysis, therefore, if these issues are relevant the appellants lose both ways. If the phrase "in connection with the transfer" is added in, the evidence does not allow an adequate conclusion. If it is left out, it is too vague for effective enforcement. However, these views should be regarded as obiter to the basis of our decision.
23.               In these circumstances, for reasons which differ from those of the Tribunal, we do not consider that the Directive can be enforced against the first respondents on a free-standing basis since the first respondents, in our view, upon the evidence and the law applying, are not an emanation of the State.
24.              In these circumstances these appeals will be dismissed.
25. We regard the issues raised in this case to be important and complex. If any party wishes to appeal to the Court of Session, leave will be granted.