United Kingdom Employment Appeal Tribunal

APPEARANCES

 

 

For the 1st Appellant For the 2nd Appellant	MS KATHERINE NEWTON (Of Counsel) Instructed by: Messrs Beachcroft Wansbroughs 100 Fetter Lane London EC4A 1BN MR THOMAS CROXFORD (Of Counsel) Instructed by: Messrs Pinsent Masons Solicitors 1 Park Row Leeds LS1 5AB
For the Respondents	MR MARTIN WESTGATE (Of Counsel) Instructed by: Messrs Thompsons Congress House Great Russell Street London WC1B 3LW

SUMMARY

TUPE – Identifying the undertaking – Whether transferred – Formulating preliminary issues.


 


HIS HONOUR JUDGE PETER CLARK

1. We have before us conjoined appeals by Camden Primary Care Trust (Camden PCT) and University College London (UCL) against the judgment of an Employment Tribunal sitting at London Central under the chairmanship of Mr P R K Menon, who has since sadly died, promulgated with full Reasons on 14 December 2004, following a 3 day hearing, that an undertaking was not transferred from these appellants, the 3^rd and 1^st Respondents respectively before the Employment Tribunal, to the 2^nd Respondent, University of East London (UEL) so that the contracts of employment of 6 individual Claimants, Ms Skittrall and Others, employed by either UCL or Camden PCT, were not potentially transferred to UEL under the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). We say potentially because each of those Claimants objected to taking employment with UEL, a point to which we shall return.

The Facts

2. The London Foot Hospital (LFH) was founded in 1913 as a school of Podiatry in premises in Fitzroy Square, London W1. In 1948 the LFH & School of Podiatry came under the control of the National Health Service (NHS). By 1996 the ownership of the LFH and responsibility for employing its staff devolved to the predecessor body to Camden PCT. No distinction for present purposes need be drawn between Camden PCT and its predecessor, Camden and Islington Community Health Services NHS Trust. Its funding was principally through the NHS, but was also supported by private donations, notably from the Scholl Fund. The School of Podiatry at the LFH has provided teaching to podiatrists and chiropodists since its inception (the education function); it has also provided medical treatment to patients (the service function). The course provided at the LFH School of Podiatry has been formally accredited by the relevant body, now the Health Professions Council (HPC). Accreditation, separate from the awarding of degrees, enables students on successful completion of the course to become fully-fledged practitioners. Over many years the LFH School of Podiatry has developed links with UCL and from 1991 the School of Podiatry offered a degree course in association with UCL. That course was accredited both by HPC and, from 1995, by the Society of Chiropodists and Podiatrists. The Society was 8^th Claimant before the Employment Tribunal, as a Trade Union representing employees of Camden PCT.
3. On 26 September 1996 a tripartite agreement (the Podiatric Medicine Agreement; "PMA") was entered into between (1) The Secretary of State for Health (S of S) (2) Camden PCT, by its predecessor and (3) UCL. At paragraph 8(1) of their Reasons the Employment Tribunal found that under the provisions of the PMA UCL and, now Camden PCT agreed jointly to provide a BSc (Honours) degree course in Podiatry. That description accurately reflects the terms of the PMA, which is before us. Under the heading 'Objectives of the Agreement' Clause 3.1 provides:

"This agreement sets out the terms for the provisions of Education to students details of which Education appear in Appendix 1 …

Appendix 1 provides:

"Education courses to be provided

COURSE DURATION

BSc (Honours) in Podiatry 3 extended years

BSc (Honours) in Podiatry 4 years"

Under Cl4 SERVICES TO BE PROVIDED

"4,1 Courses to be provided

4.1.1. UCL and Camden PCT shall jointly provide the courses set out in Appendix 1 …

4.1.2 UCL shall be responsible for the academic teaching and overall co-ordination of the courses or otherwise Education. Camden PCT shall be responsible for the provision of clinical placement experience and associated clinical supervision and teaching …"

4. The S of S was to be the funding body for the BSc Honours degree course. Although not expressly mentioned in the PMA the degree awarding institution was UCL. In about 2002 Camden PCT succeeded its predecessor and the North East London Workforce Development Confederation (NELWDC) assumed the role of the S of S under the PMA. It is clear that certain employees of UCL and Camden PCT were assigned to work at the LFH and School of Podiatry in the delivery of teaching and clinical placement to students on the BSc Hons course in Podiatry pursuant to the PMA. They included these Claimants. Mr Wood gave evidence before the Employment Tribunal. He was employed by UCL as Principal of the LFH and School of Podiatry Medicine; the Head of Department. So too did Ms Skittrall, employed by Camden PCT as a Senior Teacher at the School of Podiatry at the LFH.
5. In late 2002 a move away from the Fitzroy Square home of the LFH was mooted for practical reasons. The premises did not comply with the provisions of the Disability Discrimination Act 1995. That prospect was shortly followed by a report dated 13 June 2003 which led Dr Lucy Moore, Chief Executive of NELWDC to indicate her desire for a single contract with a Higher Education Institution (UCL being the preferred provider) to replace the existing tri-partite model, the PMA.
6. Negotiations followed, but on 9 April 2003 UCL indicated that it would not be bidding for the new contract for podiatry education. Two principal reasons were given; first the accommodation issue at Fitzroy Square and secondly the level of funding on offer. A tendering exercise followed and UEL emerged as the new preferred bidder.
7. Under Heads of Agreement reached between UCL and UEL on the transfer of the BSc in Podiatry programme to UEL, signed in late July 2003, it was provided that the programme currently offered by UCL would be transferred to UEL. There were transitional arrangements allowing students already registered for the UCL degree course to complete it. Thirty-one students offered places on the 2003-2004 Year 1 BSc Honours course were redirected to UEL. Nineteen of those students registered for the new UEL degree course. The UEL course was not yet accredited, but a 'verbal OK' had been given, subject to conditions. UEL reached an arrangement with Camden PCT for use of the Fitzroy Square LFH premises whilst new facilities were commissioned at UEL's Stratford, East London campus. The UEL degree course would be based on the University of Brighton programme. Clinical training would in due course be transferred to the local Newham PCT.
8. As to the existing employees of UCL and Camden PCT, including the Claimants, assigned to delivery of the PMA education contract, it was accepted by UCL, Camden PCT and UEL that TUPE would apply and all such staff would transfer to UEL on 29 September 2003. Some members of staff (the Employment Tribunal makes no express finding as to numbers) did join UEL on that date, however the 6 Claimants objected and did not do so. A discrete issue arose (Reasons, paragraph 9(14)) as to whether 2 members of staff, Mr McDonald FRCS, a Consultant Surgeon and Mr Campbell Wareham, Clinical Services Manager at LFH, both employed by Camden PCT, were effectively assigned to the PMA contract. The Claimants claimed that they were, but did not go over to UEL. Camden PCT contended that they were both engaged primarily in delivering services to patients rather than teaching students. That issue was not resolved by the Employment Tribunal.
9. Apparently material to the Employment Tribunal's ultimate conclusion was their finding (paragraph 9(30)) that UCL and Camden PCT employees would not have retained their existing status had they moved to UEL, e.g. Mr Wood would not have retained his status as Head of School. He had no idea what his job title and job content would be at UEL.

The Claims

10. By their Applications to the Employment Tribunal the individual Claimants contended that there had been no relevant transfer of an undertaking or part of an undertaking in which they were employed from, respectively UCL and Camden PCT to UEL, but that if there had been they had objected on the grounds that the transfer would involve substantial changes to their terms and conditions of employment (see TUPE Regulation 5(5)). They complained of breach of contract, redundancy and constructive unfair dismissal. The AUT and the Society, Trade Unions recognised respectively by UCL and Camden PCT, brought complaints of failure to consult under TUPE in respect of their members employed by those employers respectively if there was a relevant transfer.
11. The claims were resisted, each Respondent contending that a relevant transfer had taken place and, so far as the putative transferors were concerned, reliance was placed on Regulation 5(4B) TUPE to defeat the individual claims. Failure to consult with the unions was denied.

The Preliminary Issues

12. At a directions hearing held before a Chairman, Mr G P Sigsworth, sitting alone on 24 March 2004, the following preliminary issues were formulated:

"(i) Whether the contract to provide podiatry services was an undertaking within the scope of and meaning of Regulations 2 and 3 of the 1981 Regulations

(ii) If so, whether the undertaking transferred from the first and third Respondents (UCL and Camden PCT respectively) to UEL (the Second Respondent) on 29 September 2003."

13. We repeat the now standard caution about hearing preliminary issues. In this case the Menon Employment Tribunal observed that the first question posed at the earlier directions hearing was not well-formulated. It appeared to that Employment Tribunal to be directed to the provision of services to patients, not to the delivery of education to students. They thought that a more apt formulation of the first question would have been:

"(i) Whether the contract (the "Podiatric Medicine Agreement") entered into on 26 September 1996 by the three parties – the Secretary of State for Health ("the funding body"), UCL and Camden and Islington Community Health Services NHS Trust ("C&ICHSNT" – Camden PCT's predecessor body) …whereby UCL C&ICHSNT (i.e, Camden PCT) jointly agreed to provide podiatry education services in the form of a BSc (Hons) degree in Podiatry at the LFH School of Podiatry, is/was an undertaking within the scope and meaning of regulations 2 and 3 of the 1981 TUPE Regulations;"

14. The Employment Tribunal appears to have produced this alternative formulation after hearing the evidence and receiving the parties' closing submissions in writing.
15. In any event, they appear, from the terms of their Judgment, to have answered a third version of the first question. Their Judgment was that:

"(1) the provision of the University of London BSc Honours degree in Podiatry by University College London ("UCL") and Camden PCT (the successor to Camden & Islington Community Health Services NHS Trust) pursuant to their contract dated 26 September 1996 with the NELWDC (the successor to the Secretary of State for Health) (the "Podiatry Medicine Agreement") was an undertaking within the meaning of regulations 2 and 3 of the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE") and;

(2) the said undertaking did not transfer under TUPE from UCL and Camden PCT to UEL (the University of East London) on 29 September 2003."

16. It is, of course, axiomatic that where a preliminary issue is formulated the Employment Tribunal must adjudicate on that and no other question, absent a full opportunity being given to the parties to consider and address some other question, clearly formulated at the hearing.
17. The second problem we see in the present case is that the 2 preliminary issue questions, however formulated, stopped short of a further, highly material question in this case, namely whether the individual Claimants' objections to transferring to UEL, if there was a relevant transfer, were valid or invalid objections, applying Regulation 5(4A)(4B) and (5) of TUPE. See University of Oxford v Humphreys [2000] IRLR 183; Rossiter v Pendragon plc [2002] IRLR 483 (CA). It is not simply the overlap of factual issues which sensibly required the objection point to be considered with the transfer point, in order to save potential duplication of evidence, but, it will be seen when considering this Employment Tribunal's reasons, the risk of confusing the 2 issues.

The Law

18. The broad question as to whether or not a relevant transfer of an undertaking or part of an undertaking in which the relevant employees were employed has taken place is governed by Regulations 2, 3 and 5 TUPE. We need not set out the relevant provisions here.
19. Interpretation of those provisions has led to much judicial learning. For present purposes it is common ground that the first issue is whether there is an undertaking, that is a stable economic entity, properly identified, which retains its identity after the transfer. The applicable principles, drawn from the domestic and European jurisprudence, are helpfully summarised by Lindsay P in Cheeseman v Brewer [2001] IRLR 144, Paragraphs 10-12. The approach is multi-factoral, no single factor being determinative. Relevant factors, identified in the judgment of the European Court of Justice (ECJ) in Spijkers [1996] ECR 119, Paragraph 13, include the type of undertaking or business, whether or not its tangible assets are transferred, the value of its intangible assets at the time of transfer, whether or not the majority of its employees are taken over by the new company, 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, during which they are suspended.
20. For present purposes we also draw attention to the following statements of principle. The transfer of funding from one body to another may be of significant importance, that being an intangible asset of the business. Dr Sophie Redmund Stichting v Bartol [1992] IRLR 366 (ECJ). Alteration of the business' location and alteration in the mode of provision of the services will not necessarily prevent the undertaking retaining its identity following transfer. Porter v Queens Medical Centre [1993] IRLR 486; Kenny v South Manchester College [1993] IRLR 265.

Employment Tribunal Judgment

21. It will be seen that the Employment Tribunal held:

(1) that the relevant undertaking prior to the putative transfer date, 29 September 2003, was the provision of a University of London BSc Honours degree in podiatry by UCL and Camden PCT pursuant to the PMA.

(2) that that undertaking did not transfer under TUPE from UCL and Camden PTC to UEL on the relevant date. The principal reason for that finding appears to be (Reasons Paragraph 15(12)(ii)) that the economic entity which came into being from that date – the provision of podiatric education in the form of a UEL BSc Honours degree in podiatry – was a distinct undertaking which came into being as a result of a separate contract entered into by UEL and NELWDC.

The Appeals

22. Both the above findings are attacked in this appeal. As to the first, it is submitted on behalf of the Appellants that the Employment Tribunal misdirected themselves as to the precise identity of the undertaking prior to the putative transfer date. Purely as a matter of construction the PMA was a contract for the provision of BSc Honours courses in Podiatry. That is clear from Appendix 1 to the Agreement. There is no mention of a UCL degree throughout the Agreement, although in practice UCL, as provider of academic teaching under the Agreement, inevitably conferred its own degree. In our judgment that submission is plainly correct; if the economic entity is defined narrowly as provision of a UCL degree no question of a relevant transfer could arise, if, as happened, the PMA terminated, UCL did not tender for, or successfully tender for the new bi-partite contract and the main funding was switched by NELWDC to a new education provider. That cannot be right in circumstances where a purposive approach to the application of TUPE, designed to protect employees faced with a change of employer, is necessary as the earlier cases show. See Cheeseman Paragraph 12(iii).
23. Having fallen into error in misidentifying the undertaking pre-transfer, we are equally satisfied that the Employment Tribunal then failed properly to consider the Spijkers factors in this case. In particular:

(1) They failed to take into account a relevant factor, namely the transfer of funding from UCL/Camden PCT to UEL, the principal asset of the undertaking.

(2) They held that neither the fact that former employees of UCL/Camden PCT accepted offers of employment with UEL and that the Claimants refused to join UEL had any bearing on the TUPE transfer issue (Reasons Paragraph 15(11)). That is plainly an error of law. To treat a relevant factor (see Spijkers, Paragraph 13) as irrelevant is wrong under 'Wednesbury' principles.

(3) The 'customers' in this case were the students, existing and prospective. To say that the UCL-registered students did not transfer under TUPE from UCL to UEL (Reasons Paragraph 15(9)) demonstrates a startling misconception by the Employment Tribunal as to what TUPE is about. It is concerned with the transfer of employment, not customers. More substantively it is unclear what weight, if any, the Employment Tribunal attached to the fact that all 31 students registered by UCL for the forthcoming 1^st year course in 2003-2004 were referred to UEL and 19 chose to switch to the new UEL degree course. Such goodwill in the business as existed lay in the student/customers. It was, so far as possible, transferred in this way to UEL.

(4) It is also unclear what weight if any the Employment Tribunal attached to a relevant factor, namely that all relevant employees were offered employment with UEL. It is common ground that 8 out of 15 accepted (the majority); 1 resigned for unconnected reasons, the remaining 6, these individual Claimants, objected. We accept Mr Croxford's submission that, as to Mr McDonald FRCS and Campbell Wareham, their employer, Camden PCT believed that they were not assigned to the relevant undertaking; they were principally concerned with patients rather than students. It is not suggested that this view was other than genuine. Consequently they cannot be treated as relevant employees who were not accepted by UEL.

(5) The Employment Tribunal appears to have drawn the conclusion that the activity carried on by UEL differed from that carried on by UCL/Camden PCT in 3 respects (Paragraph 15(7)). First, the UEL course was based on the University of Brighton model, not the UCL model; secondly, the UCL course was accredited; the UEL course had only received a 'verbal OK'; thirdly, UEL did not have a medical school; it was based in their School of Health and Bioscience; UCL had its own medical school.

Those factors went to the mode of providing the education service rather than the activity itself.

(6) The Employment Tribunal appears to have taken into account an irrelevant factor, namely the terms and conditions on which the Claimants, and in particular Mr Wood, would have been employed by UEL. This factor is plainly material to the validity of the Claimants' objections to transferring to UEL, as is the question of the status of the teaching course to be offered by UEL in contrast to that offered by UCL. However, that issue was not part of the limited terms of reference of the preliminary issues before the Employment Tribunal. As the Employment Tribunal correctly observe (Reasons Paragraph 15(10)) "In a TUPE transfer situation the transferred employees have a right to expect the same terms and conditions of employment after the transfer as before." To suggest that a refusal by the putative transferee to honour the transferor's terms and conditions of employment is a reason for finding that no transfer has taken place would be to stand TUPE on its head and undermine the whole basis of the protection afforded to employees under the Regulations.

Conclusion

24. For all of the above reasons we are quite satisfied that the Employment Tribunal fell into error. The conclusion that there was no relevant transfer cannot stand and must be set aside. The appeals succeed.

Disposal

25. A further issue has arisen before us as to what course we should take having found that the Employment Tribunal fell into error and that the appeal must be allowed.
26. Mr Westgate submits that the Employment Tribunal failed to make all relevant findings of primary fact, in particular as to the nature of the assets, the new funding arrangements with UEL, the number of employees transferring and as to links between the new UEL course and other outside bodies. He also draws our attention to the fact that, as the ECJ made clear in Spijkers, it is for the national court to make the necessary factual appraisal in the light of the criteria there set out. That court is the Employment Tribunal. In these circumstances he invites us to remit the case for rehearing by a necessarily fresh Employment Tribunal as to the transfer question.
27. Mr Croxford, supported by Ms Newton, invites us to determine the issue ourselves. He submits that sufficient findings of fact have been made by the original Employment Tribunal to allow us to substitute a finding that there was here a relevant transfer.
28. We prefer the submissions of the Appellants. We remind ourselves that the question is whether, on their submissions, the Employment Tribunal's conclusion was plainly and unarguably wrong and the facts do not require amplification or re-investigation. We answer that question in the affirmative.
29. Applying the Spijkers checklist the undertaking conducted by UCL/Camden PCT was that of the provision of a BSc Hons degree in podiatry (in London). The principal asset, the funding by NELWDC, passed to UEL on the relevant date. Transitional arrangements allowed for existing students to continue their courses leading to a UCL degree under the aegis of UEL. New students were to take the UEL degree course, including the majority of first year students then registered for the UCL course. All relevant employees employed in that undertaking were to be taken on by UEL. Only those who objected, or in one case resigned, did not join UEL. UEL continued to use the Fitzroy Square premises owned by Camden PCT until such time as it closed for unrelated reasons; thereafter the course would be delivered from new premises on UEL's Stratford campus. At Fitzroy Square students had the use of existing course materials and equipment. The method of delivery of the course differed, but this factor did not negative a relevant transfer. Nor did the fact that accreditation of the UEL course review had to be formalized. The nature of the activity, provision of a BSc Hons degree in podiatry, remained the same after the relevant date as before. There was no time gap. The same students attended the same course taught by the same staff (less the objectors) in the same building using the same materials as before the relevant date. Substantially the same activity was carried on by UEL after that date as that carried on by UCL/Camden PCT immediately before that date. This was plainly a relevant transfer preserving the employment rights of staff transferring to UEL.
30. The real issue here, in our judgment, is not whether there was a relevant transfer, but whether the individual Claimants' objections to transferring to UEL were valid in terms of Regulation 5(5) read with Regulation 5(4A) and (4B). Since that issue has yet to be determined we direct that the case be remitted to the London (Central) Employment Tribunal to proceed on the basis that a relevant transfer took place on 29 September 2003. We understand that the Regional Chairman, Mr David Latham, has now taken over its case management. It will be a matter for him, or such Chairman as he appoints, to give directions for the future conduct of the matter. In particular, whether the 'objection' point is to be taken as a further preliminary issue prior to a full merits hearing.