United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR C JEANS (One of Her Majesty's Counsel) Instructed by: Messrs Todds Murray LLP Solicitors Edinburgh Quay 133 Fountainbridge Edinburgh EH3 9AG
For the First & Second Respondents For the Third Respondents	MR A ROSS (of Counsel) Instructed by: Messrs Rowley Ashworth Solicitors 247 The Broadway Wimbledon London SW19 1SE No appearance or representation by or behalf of the Third Respondents

SUMMARY

Transfer of Undertakings: Consultation & Other Information; Transfer

Practice & Procedure: Appellate Jurisdiction

Nature of "undertaking" for the purposes of TUPE: could there be a stable economic entity arising out of work done under contract where the contract could be terminated at will or others brought in to do the work in substitution?

Could there be a transfer of labour where equipment was needed to perform the tasks but that equipment was hired by the "transferor"?

Were the reasons given adequate in that the Employment Tribunal decided that the undertaking was labour intensive yet that most of the workforce continued to work for the transferor?


 


THE HONOURABLE MR JUSTICE LANGSTAFF

1. This is an appeal from a Decision of the Employment Tribunal sitting at Cardiff which was promulgated on 31 December 2004. It relates to facts which date back as far as 2001 and 2002. Prior to 1 January 2002, Hyder had contracted with Western Power Distribution for a number of services provided under three contracts. In Hyder's eyes, this was their Street Lighting Division. Those three contracts were a cable contract, sometimes known as "dig and lay" about which no more need be said; a jointing contract which involved services to joint electrical cables one to another and a contract, known by the acronym "RASP" which may stand for renewal aerial supply and programme, although a different explanation of the words was, at one time, agreed between the parties.
2. From the evidence of Mr Kitto, which the Tribunal recited, each contract was operated by Hyder as a separate entity with a contract supervisor and foreman, with separate administration, with dedicated employees and each self-sufficient.
3. At the end of 2001 the contracts came to an end. Hyder had been unsuccessful in bidding for the renewal of the contracts. So far as the jointing contract is concerned, that was awarded to Balfour Beatty Power Networks Ltd, whom we will call "Balfour Beatty". So far as the RASP contract was concerned, that was awarded to Interserve Industrial Services Ltd, the Second Respondent, whom we will call Interserve.
4. The issue arose as to whether the employees who had been assigned to work in the separate entities designated to each contract had their employment continued with Balfour Beatty if they were engaged in the jointing work, or Interserve if on the RASP work, by virtue of the Transfer of Undertakings (Protection of Employment) Regulations 1981.
5. Thus the issue which the Tribunal posed itself as, indeed, it was obliged to do by Regulation 30(6) of the Employment Tribunal Rules of Procedure 2004, was whether there had been a relevant transfer in each case; an issue which the Tribunal subdivided into two questions following on from the guidance given in Cheesman v Brewer [2001] IRLR 144 as involving the questions: first, whether there was an economic entity capable of being transferred and secondly, whether that entity retained its identity after the transfer in question.
6. In both cases, that of the jointing contract and that of RASP, the Tribunal concluded that both questions were to be answered affirmatively. This appeal constitutes separate appeals heard together against the reasoning by which the Tribunal came to those conclusions. Although many of the issues overlap, and many of the same points are taken by Mr Jeans, who has appeared on behalf of the Appellants, and many of the same answers are given by Mr Ross who appeared before us, as he did below, for the employee, we nonetheless have to regard them effectively as two separate appeals heard together. The first involves Mr Wilcox and five others, the second Mr Seymour and 18 others.
7. The challenges which Mr Jeans makes are essentially five in number. Firstly, he argues that the Employment Tribunal was not entitled to conclude that there was an undertaking capable of being transferred or, if it was transferred, that there was no undertaking recognisable in the hands of Balfour Beatty or Interserve after transfer. That is because, he says, there could not be, given the nature of the underlying facts.
8. Secondly, he argues that the Employment Tribunal clearly mis-described and misunderstood the nature of the economic entities which they purported to find. The Tribunal described each as labour intensive. Mr Jeans argued that because it was clear that equipment and plant was significantly necessary for the operations, such a description was a clear error and led, in turn, to further errors to which we shall come.
9. Thirdly, he argued that the Tribunal had wrongly focused upon the fact that material and plant, which was utilised in the course of both operations, was leased as a reason for watering down the significance of an agreed fact that there had been no transfer of plant and materials from Hyder to either Balfour Beatty or Interserve. Because of the significance of that plant in the context of these undertakings, there could be no transfer without, he maintained, a transfer of such material and plant.
10. Fourthly, he argued that the Tribunal did not have proper regard in assessing whether there had been a transfer or not to the number of employees who had transferred. Yet this was a case in which the number or qualities of employees was paramount as it had to be if the undertaking were properly described as labour intensive. It was, he urged, incumbent upon a Tribunal to examine the balance as between those employees who would have had employment or did have employment, with Balfour Beatty or Interserve if there had been a transfer, compared to those who had been regarded as part of the self-same undertaking but who remained in the employment of Hyder.
11. Fifthly, he argues that the Tribunal mis-stated and mis-approached their finding that one of the reasons for not taking on employees was an attempt to avoid the operation of TUPE. This, he argues, was an impermissible consideration in the context and not argued.
12. Those specific points arise in respect of a general challenge to the quality of the reasons which the Tribunal put forward. We shall deal with each in greater detail when we turn to dispose of this appeal but first, we must remind ourselves of the approach which we, as an Appeal Tribunal, have to take.
13. We may not substitute our own view of the facts, however convinced we may be of their righteousness, for those of the Tribunal if the factual finding below fell within the remit of that Tribunal; and we have to remind ourselves that whether or not there was an undertaking, is essentially a finding of fact as the European Court of Justice has emphasised in case after case. We also have to remind ourselves that whether there has been a transfer of such an undertaking, again involves a factual assessment. This is not the occasion for a rehearing of fact. We may only interfere if there is an error of law. We recognise that an Employment Tribunal does not have to deal with every argument which is presented to it. It is common experience that Tribunals sometimes appear to fear that if they do not deal with every argument, however small, and every disagreement, however immaterial, which is put before them, they may be subject to criticism. The criticism which we would make, however, is that approach itself tends to a complete lack of clarity.
14. Some arguments may even appear central before a Tribunal but on a logical approach, applying appropriate principles, are of no real relevance. Although we hope and expect Employment Tribunals to deal with an argument which had appeared to the parties before it to be central, we do not consider it to be an error of law if the Tribunal does not do so. The Tribunal's decision is not required to be one which is the product of elaborate draftsmanship. It needs simply and preferably, as briefly as the circumstances properly permit, to deal with the issues before it and its conclusions.
15. We can do no better than to summarise what we have said in the words of Sedley LJ in the case of Allonby v Accrington & Rossendale College [2001] EWCA Civ 529, also reported at [2001] IRLR 364. At paragraph 22 he found it necessary to remember in the following words that:

"22. It is not appropriate to expect an analysis of every fact and argument with reasons for accepting or rejecting them (Varndell v Kearney and Trecker Marwin Ltd. [1983] ICR 683, 693); that a tribunal's reasons are not to be construed like a statute or a deed; and that 'what matters is whether the decision under appeal was a permissible option' (Piggott Bros. Ltd. v Jackson [1992] ICR 85, 96, 92). This said, there is no point in giving reasons unless they make it possible, at the very least, for parties, advisers and appellate courts to see whether the tribunal has correctly understood the law, has addressed the right questions and has reached its conclusions by permissible means (see Piggott Bros, ante, 94F-G). Beyond this point the nature of the issues and the evidence will call for more or less in the way of explicit findings. To dilute this minimum would not only deplete the duty to give reasons and devalue the election under the Industrial Tribunals (Rules of Procedure) Regulations 1985, Sch. 1, para 9(3) to give full (or "extended") rather than summary reasons; it would risk contravening s.6 of the Human Rights Act 1998 by permitting tribunals' written reasons to fall below the standard, corresponding broadly to our domestic standard, required by Article 6 of the European Convention on Human Rights (see Van de Hurk v The Netherlands (1994) 18 EHRR 481, para. 61; Hiro Balani v Spain (1995) 19 EHRR 566, para. 27)".

16. We think that not only is it a fundamental requirement of the judicial process that reasons should be sufficient to do that which Sedley LJ identified, but also that they provide two further useful functions. First, they act as a necessary discipline for the fact finding or fact assessing body. If a Tribunal sets out the essential facts which it finds, it is easier to demonstrate the process of reasoning it adopts and it is easier for it itself to adopt a proper course. Secondly, we consider that the importance of giving reasons is also to demonstrate to an appellate body such as ourselves that a Tribunal has properly addressed the matters before it. In particular, if a process in which balance has to be struck is a necessary part of the decision making process, as it was with the issues or proportionality which featured in Allonby and, as it seems to us, necessarily is part and parcel of a determination by a Tribunal whether there has been a transfer of an undertaking or not, it is important for a Tribunal to set out the facts which are principally relevant in allowing it to reach that conclusion and those, as in the case of any balance, will be factors which tend one way as well as the other.
17. Thus, in any case in which a transfer of undertaking comes to be reviewed by a Tribunal, we would expect that Tribunal to indicate the matters which it selects as being of particular relevance in reaching that conclusion and to indicate also those matters which might tell substantially against it if only to indicate why it is the Tribunal has rejected them as important factors.
18. In approaching the task which a Tribunal has and which this Tribunal had in determining whether there has or has not been a transfer of an undertaking, the Tribunal will be applying what, in this case, it took correctly to be well-settled law in the main. Thus, this Tribunal entirely appropriately addressed its task as advised by this Tribunal under the presidency of Lindsay J in Cheesman v Brewer Contracts Ltd. That involved asking the two questions which it addressed itself as its principal issues. In order to answer those questions, it had to apply the approach indicated by paragraph 11 of Cheesman. That effectively was to approach the issue of balance and determination as it was approached in the Spijkers case which has been familiar territory ever since in this area. Thus, in the Court of Appeal in RCO Services v Unison [2002] ICR 751, at paragraph 26 of this judgment, Mummery LJ cited from Spijkers itself. It bears repetition.

"11. The decisive criterion for establishing whether there is a transfer for the purposes of the Directive is whether the business in question retains its identity.

12. Consequently, a transfer of an undertaking business or part of business does not occur merely because its assets are disposed of. Instead it is necessary to consider in a case such as the present whether the business was disposed of as a going concern, as will be indicated inter alia by the fact that its operation was continued to resumed by the new employer with the same or similar activities.

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

14. It is for the National Court to make the necessary factual appraisal in the light of the criterion for interpretation set out above in order to establish whether or not there is a transfer in the sense indicated above".

19. Thus, it was that in the RCO case itself, the Court felt that it could be regarded as a factor to be taken into account, though not determinative one way or the other, that the conduct of the would-be transferor or transferee in particular had been such as to avoid the application of TUPE.
20. Two other authorities have featured in the argument before us to which particular reference must be made. In the case of Ledernes Hovedorganisation, acting on behalf of Ole Rygaard v Dansk Arbejdsgiverforening, acting on behalf of Strø Mølle Akustik A/S, Case C-48/94 ECR 1995 1-2745, the European Court of Justice considered or held that in order to be a transfer of an undertaking business or part of a business within the meaning of Article 1.1 of Directive 77/187 (as was the operative Directive then), the transfer must relate to a stable economic entity whose activity is not limited to performing one specific works contract. It went on to observe that that is not the case where there is a transfer from one undertaking to another of building works with a view to their completion and the transferor undertaking merely makes available to the new contractor certain workers and material for carrying out the works in question. Such a transfer could come within the terms of the Directive only if it included the transfer of a body of assets enabling activities of the transferor undertaking to be carried on in a stable way.
21. It is worth pointing that the factual background in Rygaard was that Petersen, a firm of carpenters in Denmark, employed, amongst other workers, two apprentices. The case related to whether or not those two apprentices could consider their employment continued with another company, Strø Mølle, which took over the tag end of a building contract upon which Petersen had been engaged, utilising the services of the two apprentices and the use of some materials to do so. The European Court of Justice felt able to take the view that the supposed transfer of employment of the apprentices could not be a transfer of an economic entity to which the Directive applied.
22. Next, we have been shown the case of Abler v Sodexho [2004] IRLR 171. This was a case in which catering services had been contracted out by a hospital to a contractor. The hospital decided to re-tender the catering contract which was then awarded to Sodexho in substitution for the previous contractor. Sodexho refused to take over the previous contractor's materials, stock and employees. The issue was whether or not there had been or could be a transfer of employment. It was contended by Sodexho that there had been no transfer of an undertaking as it had refused to take over even one of the employees from the previous contractor.
23. This argument, as paragraph 32 of the judgment demonstrates, was based upon judgments in which the European Court of Justice had held that certain sectors in which activities were based essentially on manpower – and I shall come back to that phrase in the context of the submissions that we have heard in this case – a group of workers who were engaged in a joint activity on a permanent basis may constitute an economic entity. According to that case law, the Court noted, such an entity was capable of maintaining its identity after it had been transferred where the new employer did not merely pursue the activity in question, but also took over a major part in terms of the numbers and skills of the employees especially assigned by his predecessor to that task.
24. The Court reached the conclusion in Abler that despite the absence of the transfer of a single person to Sodexho from the previous contractor, there could nonetheless be a transfer of undertaking. It noted that the national Court, in paragraph 35, had to take into account the type of undertaking or business concerned and that the degree of importance to be attached to each criterion for determining whether or not there had been a transfer within the meaning of Directive 77/187 would necessarily vary according to the activity carried on or, indeed, the production or operating methods employed in the relevant undertaking business or part of the business. It continued, in relation to particular facts of that case, to observe that catering, the activity in question in that matter, could not be regarded as an activity based essentially on manpower since it required a significant amount of equipment.
25. However, it seems to us that the principle set out in particular at paragraph 35 demonstrates that the factual assessment of the importance of the balance between the significance of equipment, plant, premises, goodwill, tangible and intangible assets, and the question whether the identity of the labour force is a significant part of the undertaking, will necessarily vary. If one were to regard it as a spectrum, then if at one end of the spectrum were to be activities which could be regarded as almost entirely labour intensive (the example used in argument was cleaning) and at the other an undertaking which was almost completely reliant upon heavy plant, machinery and premises (such perhaps as heavy manufacturing requiring no skilled labour input), there would be a sliding scale between them in which the relevant importance of the number and skills of the workforce engaged would necessarily vary.
26. It will be necessary to come back to the implications of Rygaard on the one hand, Abler and two further cases in the European Court of Justice, Oy Liikenne [2001 IRLR 171, sometimes known for simplicity as "the Finnish bus case" and a recent decision of the Inner House of the Court of the Session in Scottish Coal Company Ltd v McCormack & Ors [2005] CSIH 68.
27. Addressing the evidence before it in the present case, the Tribunal set out the facts with this introduction at paragraph 5:

"In both sets of proceedings a schedule of agreed facts have been produced by the Claimants and the Second Respondents. This has reduced to a very large extent the need of the Tribunal to set out in this Judgment all the facts found by itself. Little purpose would be served in reciting in this Judgment the contents of these schedules. For the avoidance of any doubt, the Tribunal finds the facts as agreed in those two documents".

It then went on to find particular facts and set them out in a form which, intending no disrespect to the Tribunal, none of us found to be an easy read. Facts appear to be recited with there being no attempt to demonstrate the particular significance of the individual fact recited.

28. On closer analysis, we have been persuaded that the schedule of agreed facts contains not only agreed facts indicated, perhaps paradoxically, by a tick under the heading of "Disagreement" but also facts which, by virtue of comments made in the schedule, appear to be wholly or partly in contention. The schedule goes to some 50 facts, agreed or disputed, in respect of the jointing contract and to 88 in the case of the RASP contract. We think that the Tribunal, in its approach at paragraph 6, was resolving most of the disputed issues as revealed by the schedule of facts but they do not refer back to the schedule in the course of doing so. Nor is it clear that they resolved every dispute of fact though, as we have already indicated, they would not necessarily have to do so.
29. Having dealt with the evidence in that way and set out, without controversy, the law between paragraphs 7 and 10 of its Decision, the Tribunal recorded in two brief paragraphs what had been the essential submissions of the parties at the conclusion of the case. These submissions, it should be noted, were made at the same time as the facts were agreed. The facts were not agreed in advance of the hearing.
30. Turning to the jointing contract, the Tribunal asked whether there was an economic entity capable of being transferred. It said this:

13. The work under this contract related to a specific area and supported the electricity supplier in that area. The way the work was organised was with jointers in teams and being of the same or similar work generally under the control of the WPD. The fact that some workers were based in different locations is at best a neutral factor because a stable economic entity can exist in different geographical locations. However, we find that they were all working under the umbrella of the contract that existed with the WPD. Mr Kitto's evidence shows that they were organised on a basis separate from others. Bearing in mind the existence of the general contract with WPD through a number of years, it is highly suggestive of it being a stable economic entity. The vehicles supplied for the teams would be kept by them and they would go to their working place, their site, from day to day. There was little direct management control other than indicating where the team should go to obtain work. The workers had required levels of WPD authority for the work that they performed and had to be accredited, bearing in mind the method manuals used by WPD. The teams used materials provided by WPD, although some tools were provided by Inframen. Where the work was jointing cables, that was one on primarily WPD Infrastructure and local authority street lighting' work formed another part of their working time. The work involved jointing skills.

14. We accept the Respondents submission that the simple fact that the activity being carried out by each member of the group of workers was the same or similar is not itself sufficient without other factors to show a stable economic entity. But we consider that here there are other factors as set out above which clearly inks together all the members of the jointing teams, such that it can be recognised as an economic entity for the purposes of the regulations. Applying the Cheesman test we find that there was an economic entity".

This is criticised by Mr Jeans who argues that the Tribunal did not clearly identify what the economic entity in question was. He points, for instance, to a sentence: "Mr Kitto's evidence shows that they were organised on a basis separate from others" as being, in the context, meaningless. He argues that when the Tribunal then turned to consider, as it did, whether the economic entity had retained its identity of the transfer in question and set out what it set out at paragraph 16, the failure to identify clearly what the economic entity was came home to roost:

"We consider that the economic entity was a labour intensive one and we consider the EMC point to be of some importance and is applicable here. Again, the Cheesman multi-factional approach involves consideration of the fact that the work carried out afterwards from January 2002 as the same work as had been carried on before that date. Also, the same degree of WPD control was exercised with the need to comply with WPD manuals and methodology. We do not accept the evidence of Mr Good that the 2002 contract was being run a different way. He would not be in a position to give the definitive answer and on the best evidence available was what the Claimants did and how it was organised. On the facts we find that it was carried out in a similar way. The geographical area covered was centred around Cardiff and was either the same or not substantially different. Assets such as vehicles, were not transferred but they were leased vehicles. Hand tools were provided by the contractor. New management did not transfer across but we find that such a person or persons as well as remaining workers did not transfer because Balfour Beatty refused to take them on. We do not consider, as submitted by the Respondents, that there was 'the vital part played by vehicles, plant and equipment and specialist tools were carried out by the jointers". We consider that the reason and the principle reason why the Claimants did not transfer over was the Balfour Beatty's attempt to avoid the TUPE regulations. The Astle & Others case can be clearly distinguished on its facts because there the reason behind the refusal to take on the men, the Claimants, was found to be because the relevant party; the Council, selected a market economy and that was the reason why the workforce was not transferred. In the present case we find there is no similar reason. It is therefore necessary for us to consider the fact that Balfour Beatty failed to take on the workforce in order to avoid the application of TUPE as a factor alongside all the other factors in determining whether there has been a transfer. We consider that there would have been a transfer if the workforce had been taken on. All the factors referred to above point to that conclusion. We answer this question in the affirmative.

The rasp contract application. Was there an "economic entity" capable of being transferred?

The work under this contract was related to a specific area and supported the electricity supplier in that region. The Claimants had been part of the contract for several years. The work would be fairly constant over a period of time and the contract was managed as a separate entity by the contracts supervisor. Certain additional works were billed as day works. Directions would be given to the men by a supervisor and the men would go to WPD depots to be given more direct instructions by WPD's engineers. Apart from the 2 supervisors there was no other management structure in place. The skills of the workforce were necessary as this was required by the WPD authority for the work that they performed. Although from time to time the Claimants would be sent to assist other contracts, this was the exception and does not alter the cohesion of this particular group and the work it was engaged to perform. We find that there was a clear economic entity applying the Cheesman test of a multi-factorial approach.

Did that economic entity retain its identity after the transfer in question?

We find that the same work was being carried out from January 2002 onwards by almost the same people with the same objectives. The majority of the work assigned to the contract did become employed by Interserve Industrial Services. Mr Bowen, contract engineer, commenced work from 17 December 2001. It was then that he started recruiting a number of the first Respondents employees. Mr Bowen did not give any evidence to the tribunal but the Respondents submit that his position is not as a contract engineer or senior authorised engineer with Interserve but a more general and wide ranging role described as project manager. We do not accept that that was a limited role by Mr Bowen and the evidence suggests he carried on more or less the same sort of role as with the first respondents. He is a key senior employee. We find that the skilled workers, which were mainly linesmen taken on, was because of the required levels of authority to keep the undertaking continuing as before to ensure there was no break in activity. We find that the reason why labourers did not transfer was connected with the attempt to avoid the TUPE regulations applying. This is a factor to be considered amongst all the other factors in the case. We consider this to be a case in which ECM considerations apply as defined in the Astle case".

31. He made a number of detailed points. For us, we have to remind ourselves that the Tribunal was asking the question whether, within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations there had been a transfer of an undertaking. Undertaking is defined by Council Directive 2001/23/EC in Article 1b. It is said that

"There is a transfer within the meaning of this Directive where there is a transfer of an economic entity which retains its identity"

An "economic entity" means an organised grouping of resources which has the objective of pursuing an economic activity whether or not that activity is central or ancillary. Thus, one looks, for the purposes of appellate review, to see whether the Tribunal has found an organised grouping of resources with the objective of pursuing an economic activity.

32. Specifically, the points which Mr Jeans took were these. He notes that there was a challenge made by the representative of Balfour Beatty before the Tribunal to the question whether the workers engaged on the jointing contract could together form an economic entity within the meaning of the Directive. At paragraph 2.6 of the written submission for the Second Respondents made in writing to the Tribunal at the conclusion of its deliberations, it was argued that there was no identifiable piece or portion of work that could be said to belong to Hyder; that the task to which the workers, including the Applicants, were devoting their time was not sufficiently unique or self-standing to give rise to the characteristics of identifiable economic entity. Balfour Beatty were in a position to make this submission because they were able to point to the contract between Balfour Beatty and Western Power Distribution. In short, under that contract (see page 22) the contractor was not awarded any exclusive right to execute jointing work within the prescribed area. A continuity of work was not guaranteed and although it was said that the volume of work anticipated to be executed was as indicated within the contract, based upon historical criteria, that was given without prejudice and for guidance purposes only and could not be guaranteed. Thus, he points out, that the contract gave no rights to Balfour Beatty in any sensible economic form; another contractor could be brought in to complete the work or to do the work; there would be no come back.
33. Moreover, in the schedule of agreed facts, at agreed fact 2, the parties accepted that the jointing contract was used to supplement WPD's own jointing resources. Thus, Mr Jeans submitted that there was what he called "defeasibility", that there could be no stable economic entity in the sense used in Rygaard, that the work was, in effect, capable of collapsing at short notice and (being dependent as it was upon a single contract), thus fell foul of the principles expressed in the Rygaard case. He accepted that the essence of his submission was that Balfour Beatty, which had a workforce organised throughout Wales to perform contracts of a similar sort in the principality for Western Power Distribution, would not be an undertaking because WPD gave them no guarantee of work and because, in any event, the work done was merely supplementing that done in any event by the principal employer.
34. We reject that submission. It seems to us that what matters in determining whether there is an undertaking is whether the test in the Directive can be said to be met or not. That is essentially a question of practicality. It is not to be defined by legal constructs other than those implicit in the Directive itself. The Directive is directed towards the safeguarding of employees' rights in the event of a change of employer. If it were right that those working for Balfour Beatty under a contract such as this, not matter how long they had worked for Balfour Beatty, nor how carefully they were organised and structured, nor how long they might expect, even if they could not demand, to be employed further, did not constitute collectively an undertaking, then any change of employer to which those employees were subject, would not itself be subject to the transfer of undertaking regulations. If X Co succeeded over a weekend to the business of Balfour Beatty, there would no transfer of an undertaking upon this analysis because the core underlying contract did not provide the necessary stability. We think that the factual circumstances are so far removed from those which operated in the Rygaard case that not only would that defeat the purpose of the regulations as we understand them to be, but it makes no practical sense. Moreover, as the lay members would have wished to point out, it would have significant consequences for the avoidance of the transfer regulations because such an approach would encourage would-be employers who wished to avoid any TUPE consequences to ensure that contracts were "defeasible" even if the expectation of the parties was that they would be honoured in a practical way.
35. The second point which Mr Jeans takes relates to the nature of the contract. He argues that to describe this economic entity as a labour intensive one was and had to be a mistake. This is because in the agreed findings of fact, it is clear that equipment was of importance. No vehicles, no plant, no equipment and no tools passed from Hyder to Balfour Beatty – agreed fact 37. Vehicles were used in the contract. It is perhaps plain that the jointing contract would involve the use of equipment and, indeed, Mr Jeans took us to a list of essential equipment held by jointers. Thus, to describe this contract as one which was labour intensive was to mis-describe it. We have some sympathy with a description of both the contracts in this case as being essentially labour intensive, but we consider that what the Tribunal were doing in the paragraphs which I have cited was addressing a submission made to it which is recorded at paragraph 11 where it is noted that Mr Ross had argued:

"Considering the type of undertaking which requires skilled employees combining with labourers or mates, the relevance and weight to the factors relied upon by the Claimants is far greater than the importance attached by the Respondents to the lack of transfer of valuable assets".

36. It was being argued, therefore, that the identity and qualifications and skills of the workers concerned was a critical part of the operation of which they were part. Thus, Mr Ross noted in his submissions that the last sentence in paragraph 13 refers to the skills which were necessary to do the work. A little earlier, the Tribunal noted that required levels of authority and accreditation were necessary. This was not, therefore, the case of an unskilled workforce, but one in which not only the fact of workers working for an undertaking, but their ownership of skills accreditation and training was relevant. We think therefore that the Tribunal was entitled to come to the conclusion that the economic entity which they found was one in which labour played a significant part and that is what we think they meant by describing it as a labour intensive one. We should add that despite the criticisms made of the wording in paragraph 13 by Mr Jeans, we are satisfied that the Tribunal was identifying there an organised grouping of resources within the definition of Section 1. In particular, the reference to Mr Kitto's evidence which shows that they were organised as a separate unit, that is on a basis separate from others, effectively answers the question and is, in any event, a reference back to particular findings of fact which the Tribunal made in respect of that evidence at page 3 at which it described each contract as being managed as a separate entity by a contract supervisor and foreman with contract specific administration and with dedicated employees.
37. Accordingly, we consider that the appellation "labour intensive" is not necessarily a mis-description and is one which the Tribunal was entitled to come to on its assessment of the facts. We recognise, however, that it would have been desirable for the Tribunal to have said something more about the importance of labour within the contract. We do not think that their failure to do so goes so far as to represent a defect, particularly when it is plain that they were considering a submission by the Respondents that the part played by vehicles, plant, equipment and specialist tools was vital to the operation (see their citation in the middle of paragraph 16). Their rejection of that shows that they had well in mind the need to balance the significance within the contract of the nature of the labour and the nature of the equipment which it was using.
38. The third point essentially that Mr Jeans made was that there having been here no transfer of materials or plant, there could be no transfer of an undertaking since even if the undertaking were reliant in many respects upon employees, it was also essential that it used certain equipment. Amongst such equipment, for instance, would be a HIAB lorry, for the purposes of ground works on the RASP contract, essential equipment consisting of the tools that the jointers would use and the vans that they used to transport them in. Here, the Tribunal had taken into account, as our citation from its decision shows, that the materials and plant had been leased by Hyder and were, to an extent, leased by Balfour Beattie. It appears, for instance, from the agreed statement of fact that in respect of the jointing contract, paragraph 17, that teams had been provided with vehicles and hand tools but at paragraph 16 that Hyder leased the vehicles used by the teams.
39. It was also an agreed fact, turning for a moment to the RASP contract, although we shall look at that separately, that Hyder had leased vehicles. The submission was that if the identity of an undertaking is to be defined in part by the fact that it utilises plant and machinery as part of the resources, then a failure to transfer such plant and machinery indicates that there has been no transfer of that undertaking. There was no basis, argued Mr Jeans for relegating the significance of the non-transfer of equipment but that, he noted, was what the Employment Tribunal had done at page 13.
40. We reject this submission. We consider again that regard needs to be had in making a factual assessment in this context to the practicalities. There may be cases in which the failure to transfer equipment, for instance buses in a bus undertaking (see Oy Liikenne) may demonstrate that there can have been no transfer of a bus undertaking. It is not difficult to think of other examples. Where, however, the purported transferor does not own equipment but as a matter of commercial prudence, chooses to lease that equipment, it does not seem to us to be of a matter of such critical importance that that equipment or those leases are not transferred over to the would-be transferee if the transferee himself or itself similarly leases identical equipment. Each is choosing to ensure that the operation continues with equipment owned in each case by a third party and not by the proprietor of the undertaking. Instead of the equipment being a capital asset, it is something which is paid for out of revenue. The lay members, in particular, see this as being a case in which it could not be said that assets of a business had not been transferred since leased goods cannot be described easily as assets and the essential aspect of such a transaction is that, as a matter of practicality, similar items are used after as before the transfer and obtained for that purpose. Accordingly, we think that the Tribunal were entitled to take account of the fact that the equipment here was leased rather than owned and to bring that into the balance in making the overall factual assessment it did.
41. Next, Mr Jeans turned to the question of the employees engaged upon the contract. Here, it is necessary to remind ourselves that the Tribunal had described the operation as being one which was labour intensive. That is that one in which the number and identity of the workforce, or at least the number of those professing certain skills, was a matter of very significant importance compared to other factors. Thus, one would expect to see an analysis which approached what had happened by reference to that which is said in Süzen v Zehnacker Gebäudereinigung GmbH Krankenhausservice [1997] ICR 662 and which is recited in other European Court decisions namely that a decision as to whether there has or has not been a transfer may depend upon whether a majority of the workforce or a major part in terms of their number of skills has been transferred.
42. The agreed evidence, and the Tribunal found, was that on the jointing contract, 23 employees had been engaged by Hyder. During December 2001, 17 of those were found placements within Hyder. It may have been that they were found those placements in consequence of a failure by Balfour Beatty to recognise that there might be a transfer to which TUPE applied but the Tribunal do not say that that was necessarily the reason. That left six. They were organised in three teams of two, each consisting of a jointer and a mate. On 25 January or maybe 21 – different dates are used – Mr Jones and then Mr Wright began to work for Balfour Beatty. Subsequently in April or May 2002, Mr Williams was employed by them. The other three, it appears, were not. Thus, if one were to look at the undertaking in the hands of Balfour Beatty after the transfer, it would consist of three people (or three people, who were part of a larger and wider undertaking in the hands of Balfour Beatty).
43. The Tribunal do not, in any part of their discussion, deal with whether or not this represented a failure to take on a major part of the workforce in terms of numbers and skills. They do say:

"We consider there would have been a transfer if the workforce had been taken on".

However, that comes at the end of paragraph 16 which follows paragraph 15, the last sentence of which says:

"However, the Applicants say that the entity consisted of those asking to work under the contract".

44. It was an agreed finding of fact that, although 23 people had been assigned to the 1997 contract and formed part of the undertaking – it is interesting to note the word "undertaking" there appears to have been agreed between the parties – that seven names were put forward by Hyder to Balfour Beatty as potential employees before the end of December of whom six were actively seeking employment with Balfour Beatty in early January. Accordingly, a natural reading of paragraph 15 would suggest that the Tribunal, when it came to paragraph 16, was addressing an entity which consisted of six people and six people only. We cannot see where, in its Decision, it deals with whether those six constituted an economic entity in the Directive sense or even part of an undertaking to which the Directive and regulations might properly apply.
45. The matter is further complicated by the fact that in the middle of paragraph 16 the Tribunal say

"New management personnel did not transfer across".

Mr Jeans points out that it was difficult to know quite whom they had in mind. They go on to say

"….but we find that such a person or persons as well as remaining workers did not transfer because Balfour Beatty refused to take them on".

"Remaining workers" is capable of being read in two senses. It may mean those workers who remained in the employment of Hyder. It may mean those workers who, of the six, were not taken on in 2002. It is not clear. Since the number of the workforce is plainly critical if one is to apply the approach that this undertaking was a labour intensive one in the hands of Hyder, and thus it is highly relevant to know whether the transferee has or has not taken on a major part of the workforce, these failures are, it seems to us, failures to indicate to the parties why, on this issue, they have won or lost. They indicate that the Tribunal did not have clearly in mind the need to balance the undertaking as it was in the hands of Balfour Beatty against that which it had been in the hands of Hyder to see whether, indeed, it continued to operate as an undertaking or not. Thus we think that, here, there is not simply an inelegance of language but one which demonstrates an error of law. At one stage, in his submissions, although he retracted a little from that position, perhaps, Mr Ross was inclined to accept that there may be a flaw here clearly to set out what the Tribunal had in mind and that if so, the appropriate course would be remission. We think that his first instincts were right. It follows, therefore, that for this reason and because of this error, we allow the appeal in respect of the jointing contract.

46. We turn now to the RASP contract. Here, essentially the same points are taken and it is fair to say that in dealing with the issues which arose under the jointing contract, we have run together some of the facts from each. The same submission is made in respect of the identity of the economic entity. The same answer, it seems to us, applies. We note that the Tribunal had plainly in mind the appropriate test not least by reason of their reference at the bottom of page 13 to the cohesion of this particular group, as they described it, and the work it was engaged to perform. We think that they were entitled to conclude that there was here an organised body of resources which, in particular, relied as a significant element upon the skills of the workforce as being necessary. In particular, on this contract, it would clearly be necessary that the employees had qualifications which were recognised – giving them authority to deal with electricity – and had to be trained to that end. Thus it might be difficult, if not impossible, to find similar workers on the open labour market and therefore one would expect that an incoming contractor would be inclined, perhaps, to use the services of those who had been used before. It is not for us to decide, merely to recognise that it was within the powers of the Employment Tribunal to come to that factual assessment if it chose to do so.
47. The same arguments apply and the same answers are to be given to the points that Mr Jeans would make in respect of the nature of the entity and to the transfer of materials and plant. But we now come to the issue upon which we found it unable to uphold the judgment of the Tribunal in respect of the jointing contract, that of the question of the nature of the employees transferred. Under the RASP contract, it would appear that there were probably some 26 people engaged and designated to the undertaking. The Tribunal had indicated that the majority of the workforce had been taken on by Interserve. Mr Jeans criticised this because 13 employees out of 26 would be exactly half and not a majority. We think that it is focusing too closely upon the word "majority" and not upon the sense of the decisions of the European Court which have emphasised, when they deal with the expression "major part of an undertaking" in taking a practical approach to the significance in terms of number or skills of labour concerned to the undertaking. Moreover, it would be unkind to condemn a Tribunal for describing as a majority that which numerically was in balance when, in the submissions made to the Tribunal by the employers at page 13 (page 165 of the bundle), it is said

"In pure numerical terms, Interserve employed 13 out of 25 members of the entity [and inserts in brackets 'on the Kitto list']"

and goes on to say

"or 13 out of 28 (on the Jones list)"

thereby at least indicating that it was open, as a matter of fact, for one to conclude that a numerical majority of the employees had been transferred.

48. Here we were, at one stage in the argument, persuaded that there might be a problem particular to the words which the Tribunal had used. In the agreed findings of fact, the Tribunal said at 84 that

"Interserve did not envisage any low voltage work at all. That had been agreed between the parties".

When the Tribunal came, as part of its diverse findings of fact in paragraph 6(b) to deal with the evidence of Mr McLean, it said

"Mr McLean stressed that low voltage work was something which was not anticipated as part of the original contract."

On the face of it, this would appear to be inconsistent with the agreed finding of fact. If so, that inconsistency was potentially significant in the case. At page 10, the Tribunal went on to find that, not accepting Mr McLean's evidence that the additional work was unforeseen, the conclusion could be reached that he was thereby deliberately avoiding the operation of the transfer regulations. That was part of the reasoning which the Tribunal then went on to adopt in paragraph 16 finding, as they did, that the reason why labourers did not transfer was connected with the attempt to avoid the TUPE regulations applying.

49. It had seemed to us that this might be a fatal flaw in the Tribunal's reasoning. We have been persuaded, however, that is not the case for two main reasons. First, the submissions made by Counsel for the employees was to the effect that at the time of entering into the contract it may not have been anticipated that the contract itself would cover low voltage work but, by the end of the year, it was plain that work was to be anticipated; and, indeed, it was that conflict which gave rise to the need for the Tribunal to deal in extensive paragraphs at page 9 and 10 with what they made of Mr McLean's evidence. They concluded that they could not accept the evidence of Mr McLean that this was unforeseen additional work. In short, the vice here lies, not with the Employment Tribunal's reasoning, but with the shortage of detail in the agreed fact incorporating, as it does, no particular date by reference to which the fact is said to have been agreed and we have been persuaded that it is plain that it was in dispute, and in active dispute, before the Tribunal. Accordingly, it seems to us to have been open for the Tribunal to have reached the conclusion it did in respect of Mr McLean. We note that they reached the conclusion not simply by reference to his evidence, but by reference to the evidence of Mr Bowen, whom they recorded as actively recruiting individuals, before the end of 2001. So their conclusion which was of potential relevance in this part of the case at page 14 was based not just upon Mr McLean's evidence, but that of Mr Bowen.
50. However, the second reason is this: although it seems to us to have been part of the logic of the Tribunal in deciding that there had been a transfer of an undertaking and that an undertaking was recognisable in the hands of Interserve that the employees had not been taken on who would have been taken on if an attempt had not been made to side-step the TUPE obligations, we do not think that it was, on their other findings of fact, conclusive. This is because, as page 14 indicates, they found that there was a clear economic entity, applying the Cheesman test of multi-factorial approach, with the same work being carried on from January 2002 by almost the same people with the same objectives. In short, if they were right that the number and quality of labour was a matter of significance, and were therefore entitled to hold that the majority or a major part of the workforce had been transferred, this would in itself be sufficient. There would be no need to draw further support from a conclusion as to the motive underlying a failure by Interserve to engage staff.
51. Accordingly, the conclusions to which we have come are that, although these two cases have been heard as one, the reasoning of the Tribunal so far as it relates to the jointing contract is such that we cannot support its conclusion. But we think that it was within the entitlement of the Employment Tribunal to reach the conclusion as one of fact, which it did, in respect of the RASP contract. It follows that to that limited extent the appeal will be allowed.
52. We have concerned ourselves with a further dispute between the parties as to what the consequence should be. Plainly the case has to be remitted. It is urged by Mr Ross that we should remit to the same Tribunal. This, he says, would properly recognise the importance of proportionality and time recognised in Sinclair Roche & Temperley v Heard [2004] IRLR 763 and would not fall foul of any suspicion that the Tribunal, whose defects are limited to those identified in this judgment, might not reach a proper conclusion. Suffice it to say that we think that it would be a better course to accede to Mr Jeans' submissions that, on remission, the issue of whether there was a transfer of an undertaking should be dealt with by a freshly constituted Tribunal. We do so principally for the reason that much time has passed by since the Tribunal originally reached its conclusion.
53. Secondly, we have regard to the criticisms which have been made of that Tribunal, quite properly, by Balfour Beatty even though they may not ultimately have found favour with us. We think that the parties might feel that they had not had the fair assessment from the same Tribunal that a fresh Tribunal, hearing matters from the start, might give; which is not to say, we hasten to add, that we have any doubt about the fairness and impartiality of this Tribunal, merely as to the appearance that it may give to the Respondents below.
54. For those reasons, we shall remit the jointing contract, that is Balfour Beatty Power Networks Ltd v Wilcox, to a freshly constituted Tribunal for determination.