SUMMARY
TRANSFER OF UNDERTAKINGS – Service provision change
The Claimant solicitor worked in‑house for a facilities
management company which ran into financial difficulties. In consequence she
was engaged in disposing of service contracts to third parties. Administrators
were appointed, who had previously engaged the Appellant as solicitors to act
for them in the administration. Their work in doing so involved disposing of
the company’s contracts. The Claimant, who had been purportedly made redundant
five days after the administration began, argued that there had been a service
provision charge. An Employment Tribunal at preliminary hearing agreed with
her. Since then, two decisions (Key2Law and Edenwest)
had supported the Appellant’s submissions that the identity of the “client”
before and after the SPC had to be one and the same, and that it could not be
said that the statutory provision that administrators acted as agents of the
company in exercising their functions meant that the client for whom the
services were provided was the company, rather than just the Appellant.
Held: there had been no service provision change. ET
overruled.
THE HONOURABLE MR
JUSTICE LANGSTAFF (PRESIDENT)
Introduction
1.
This appeal gives rise to three interesting questions relating to a service
provision change under Regulation 3 of the Transfer of Undertakings
(Protection of Employment) Regulations 2006 (TUPE). Where administrators
are appointed in respect of a company and those administrators appoint
solicitors to advise and work for them as administrators, and those solicitors
are used to dispose of assets of the company, are their activities in doing so
properly said to be carried out on behalf of the company in administration? The
activities involved that are subject to a service provision change: are they to
be determined by the nature of the activity or the purpose of the activity
concerned? Thirdly, is the requirement of Regulation 3(3) of TUPE such
that it can be said that an administration which by statute is expected to be
completed within a year, and a further six months only at the outside and if
provided for by a court, a specific single event or task of short‑term
duration?
The facts
2.
The facts giving rise to those three interesting questions, which I
understand have not in those terms been resolved before, are posed by this
appeal from a decision of Employment Judge Goodman at London Central,
whose Reasons for her decision were sent to the parties on 8 December 2011.
The facts giving rise to it are these. The Claimant worked toward the end of
her involvement with the Jarvis group of companies for Jarvis Accommodation
Services Ltd (“JAS”). They provided facilities management; broadly, Jarvis
built under PFI schemes; and then the SPV that Jarvis had arranged to do the
building contracted with JAS to provide for ongoing facilities management year
by year of the completed building. The contract by which JAS did so was a
service contract with respect to the premises concerned.
3.
When the Jarvis group came into financial difficulty, perhaps following
the Potters Bar rail incident, the Claimant’s job as then Director of Legal of
JAS was principally concerned with disposing of these service contracts to
outside purchasers, to the extent that it amounted, so the Tribunal found, to
some 90 per cent of her work in the last year.
4.
In anticipation of appointment by creditors as administrators of JAS,
Neville Khan of Deloitte agreed with Denton Wilde Sapte (DWS),
who, together with their successors, I shall call “Dentons”, on
12 March 2010 that Dentons should act as solicitors for the
administrators. Some two weeks later Neville Khan and three other
partners in Deloitte were appointed joint administrators. Within less than a
week, on 31 March 2010, the administrators made the Claimant redundant, as
apparently was the fate of all employees in JAS’s company secretarial
department bar one. It was said there was no money to pay her wages;
specifically, it was said that her contract was not adopted by the
administrators.
5.
The disposal of the service contracts that were of value, however,
continued. The evidence before the Tribunal as to that came from three sources
– Ms Boxford of Dentons, the Claimant, and the administrators in a public
document. The first said that effectively by summer (that is, therefore, after
some three months or so) the administrators were no longer trading JAS and that
transferees ran the contracts under licence, so there was no work then to be
done in disposing of the contracts. In paragraph 40 the Tribunal record
that the Claimant gave evidence that there was still some work on disposals done
at least until October 2010. In paragraph 41 the Tribunal recorded
that the administrators said that JAS had traded until 3 July 2010
and thereafter trading had been under licence and they had been finalising
sales. The Tribunal never came to any factual conclusion as to when precisely
the work of disposing of service contracts finished.
6.
The Claimant’s case was that she had been working for JAS largely on the
disposal of service contracts to purchasers and that the administrators, who
were agents of the company for this purpose, engaged Dentons to act as its
solicitors; those solicitors were engaged, amongst other things, in the
disposal of the service contracts. Therefore, she argued that those contracts,
being contracts for the benefit of the company, were ones the work in respect
of the disposal of which was ongoing. There had been, she submitted, a service
provision change to which TUPE applied such that her contract as Director of Legal
should be regarded as continuing in effect with all consequent employment
consequences.
The law
7.
Regulation 3 of the TUPE Regulations 2006 provides, so far
as is material:
“(1) These Regulations apply to—
(a) a transfer of an undertaking, business or part of an
undertaking or business situated immediately before the transfer in the United
Kingdom to another person where there is a transfer of an economic entity which
retains its identity;
(b) a service provision change; that is, a situation in which—
(i) activities cease to be carried
out by a person (“a client”) on his own behalf and are carried out instead by
another person on the client’s behalf (“a contractor”);
(ii) activities cease to be carried
out by a contractor on a client’s behalf (whether or not those activities had
previously been carried out by the client on its own behalf) and are carried
out instead by another person (“a subsequent contractor”) on the client’s
behalf; or
(iii) activities cease to be carried
out by a contractor or a subsequent contractor on a client’s behalf (whether or
not those activities had previously been carried out by the client on its own
behalf) and are carried out instead by the client on his own behalf,
and in which the conditions set out in paragraph (3) are
satisfied.”
8.
Paragraph (3), which applies to (b)(i), (ii) and (iii),
provides:
“The conditions referred to in paragraph (1)(b) are that—
(a) immediately before the service provision change—
(i) there is an organised grouping of
employees situated in Great Britain which has as its principal purpose the
carrying out of the activities concerned on behalf of the client; and
(ii) the client intends that the
activities will, following the service provision change, be carried out by the
transferee other than in connection with a single specific event or task of
short‑term duration; and
(b) the activities concerned do not consist wholly or mainly of
the supply of goods for the client’s use.”
9.
The parties have much in common in their argument. Thus they accept
that the focus of a Tribunal must necessarily be upon “activities”; that is
what is the subject of a service provision change. This Tribunal has observed
before (see Kimberley Group Housing Ltd v Hambley
[2008] IRLR 682) that the first question for the Tribunal is to identify the
relevant activities or, as it may be, relevant activity. Secondly, the parties
are agreed that the determination of what is an “activity” is a matter for the
judgment of the Tribunal. It was said in Metropolitan Resources Ltd v
Churchill Dulwich Ltd (In Liquidation) [2009] IRLR 700 case at
paragraph 27 to involve essentially a question of fact in the application
of the words of the provisions to any individual case.
The Employment Tribunal decision
10.
The Employment Tribunal reasoning began, critically, following the
question posed in Hambley, by identifying “activities” at
paragraph 59 as being the activity of disposing of JAS’s contracts. They
found that that was work upon which the Claimant had been engaged for some four
years, spending 90 per cent of her time in the last year. It
rejected an argument that the purpose of the administrator being to act in the
best interests of the creditors necessarily meant that the activities were
fundamentally different as performed by Dentons from those that had been
performed by the Claimant as Director of Legal of JAS, concluded that the work
done by Dentons was on behalf of a client, which was JAS, rejected the
submission that Dentons’ client was in context not JAS but the administrator,
and came to the conclusion that Regulation 3(3) did not have the result
that there was no service provision change because the activities were not
necessarily those in connection with a single specific event or task of short‑term
duration. Thus, dealing with the nature of the activities and the identity of
the client, the Tribunal said this at paragraph 57:
“However whatever the purpose of these [activities] I cannot see
a practical difference: both [Dentons and the Claimant] were providing similar
legal services in disposing of JAS’s contracts, where the bulk of the work was,
as Mrs Boxford said, in dealing with negotiations to ensure that they did
transfer their continuing contracts and that they were not terminated by the
client. To that extent it seems to me possible to split up the activities of
JAS which transferred to the administrators as agents for JAS (paragraph 68 of
schedule B1 of the Insolvency Act), and the legal work specific to
the administrators in their capacity as officers of the court. I do not see it
as a bar that the contract that the third respondent had with the
administrators was formally with the administrators, rather than with JAS, when
their contract was to do with administration work in which the administrators
were acting as agents for JAS. Stepping back from the legal formalities and
analysed in the round, DWS were providing legal services to JAS for the
administrators managing JAS. On that basis it was capable of being a service
provision change.”
11.
At paragraph 65 the Tribunal returned to the theme of who was the
client:
“The next point is whether the third respondent [Dentons] was
providing legal services to the first and second respondent [Jarvis Group PLC
and JAS] or to the administrators of the first and second respondent. That has
already been discussed in answer to [other issues]. To the extent that there
were specialised insolvency issues on which the administrators required advice,
clearly the administrators would have had to outsource that whether to DWS or
any other firm. In respect of disposals, that arguably is the work of JAS,
which became the administrators’ work when they assumed responsibility for
managing JAS on their appointment. By the end of their trading period,
arguably there were no longer disposals to be done, though there might be some
legal work still being done after the trading period to complete and finalise
the disposals.”
12.
That, I interpose, is as near as the Tribunal got, it seems to me, in
putting a timescale on the activity of disposing of service contracts, even if
it was not necessarily the time initially anticipated for that work.
Continuing:
“It seemed to me that it was quite possible to split up the
provision of legal services to the administrators between the specialised
insolvency work done for the administrators as officers of the court, and the
practical work of disposing of JAS’s contracts which iwas [sic] part of the
business of JAS, had in practice been their business up to the administration,
and continued to be for some time thereafter. To that extent I find that the
third respondent was providing legal services to the first and second
respondent, even though their contract was with the administrators, who were
acting as their agent.”
13.
Then, in relation to duration, the Tribunal said at the beginning of
paragraph 66 and working through to paragraph 69 that, first, there
was a dearth of authority on what might be a single specific event or task of
short‑term duration. It examined some commentary from the Department for
Business, Innovation and Skills on the one hand and the IDS handbook on the
other to assist it. The Judge said:
“67. The respondent points to the fact that the administration
was contemplated to last no more than twelve months, and could have lasted less
than that. In the event it lasted up to eighteen months, but it was always
predicted to be, if not short term, at least a limited term event. I can see
the attractions of the administration and the disposal of contracts being a
limited piece of work and therefore capable of being a ‘single specific event
or task of short term duration’. Twelve months may not be short‑term,
but equally it cannot be said to be long‑term; it was at least envisaged
to have a term.
68. An alternative is to analyse it like this: although the
administrators decided very promptly that JAS could not be carried on as a
going concern, at the time of appointment of administrators that was only one
possibility; although the administration itself would be of a limited term, the
task of providing legal services to JAS was one which was capable of
continuing. One of the possible outcomes of the administration was that JAS
would emerge from the administration in a healthier state and carry on business
once more, so while the administration was capable of being a ‘single specific
event or task of short term duration’, providing legal services for JAS was not
of short‑term duration, although that is what is proved to be [sic]. In
other words, the claimant, who had already been carrying out disposals, went on
carrying out disposals and presumably once all contracts had been disposed of
she would either follow them, if assigned to the contract, to the transferees,
or possibly she would face redundancy […].
69. In resolving the issue of whether, as the respondents argue,
it was contemplated as a single specific event of short term, however long it
took, but up to a year, for the administration, or whether I should take the
claimant’s case that it was continuation of what she was already doing, it seems
to me that insofar as the claimant was engaged on activities providing legal
services to JAS, those activities could have continued after the end of
administration and it was not at all clear this was in prospect a short‑term
specific task (although in retrospect it was). […]”
14.
The paragraph concludes with the words:
“I conclude that this was not caught by the exception of a
specific event of short term duration, and that the claimant’s activities did
transfer to the third respondent.”
15.
I should add in respect of those last few words that the issue before
the Tribunal Judge was not whether the Claimant’s employment contract
transferred but whether there had been a service provision change.
The appeal
16.
The three points that the Tribunal centrally decided were in issue as
grounds of appeal before this court. What was not in issue was that the mere
fact that one person, the Claimant, alone was providing the service to JAS of
disposing of service contracts meant that there was no organised grouping of employees;
it was accepted that it was possible for such an organised grouping of
employees to consist of a group of one. It was also accepted as the basis for
argument before the Tribunal that the Claimant had been employed by JAS, or at
least should be treated as employed by JAS, before any putative transfer. This
therefore came within Regulation 3 as a service provision change under the
terms of 3(1)(b)(i), and it was unnecessary to consider (ii) or (iii).
17.
Mr Reade QC argued that the phrase “activities” in the context
of an administration was such that the Tribunal was in error in concluding that
all it needed to look at, in effect, was the nature of the legal work being
done by the Claimant prior to change and Dentons afterwards. He argued that
the Tribunal was bound to have regard to the purpose that the administration
served. That necessarily meant that there was a fundamental difference between
the activities performed by the Claimant in‑house and those performed by
Dentons if outsourced. Thus he submitted that central to the appeal was an
understanding of the nature of administration and the role of the administrator
or administrators within it. The administrator is appointed under the Insolvency Act 1986
(IA); Schedule B1 details the powers and obligations of such a person.
18.
The nature of administration in the context of TUPE had recently been
the subject of a consideration by the Court of Appeal in Key2Law Surrey LLP v De’Antiquis
[2011] EWCA Civ 1567, [2012] IRLR 212. In that case Rimer LJ set out in
an extended review of the history of administration procedures the regime that
now operated under the IA and the Schedule. He noted at paragraph 32 that
whereas under the old regime there had been four purposes for whose achievement
an administration order might be made, under the current regime
paragraph 11 of Schedule B1 showed that there was but a single
purpose of administration, although it comprised three objectives in respect of
which there was a tiered priority:
“The overriding duty of an administrator is to perform his
functions ‘in the interest of the company’s creditors as a whole’. In doing
so, he must perform them with the objective of achieving the objective in
paragraph 3(1)(a) (‘rescuing the company as a going concern’) unless, however,
he thinks that it is not reasonably practicable for him to do so or that
the objective of para. 3(1)(b) ‘would achieve a better result for the
company’s creditors as a whole’. Paragraph 3(4) provides for the
circumstances in which the administrator may perform his functions with the
objective of para. 3(1)(c), an objective falling at the lower end of the
hierarchy of priority.”
19.
Thus, he submitted, the fundamental purpose of the administrator was to
act in the best interests of the creditors; that was a very different purpose
than would be the case if acting for the best interests of the company, because
the two interests might well be in conflict. This, he submitted, necessarily
coloured the nature of the activities.
20.
As to this submission, first, Churchill Dulwich, a
decision of this Tribunal presided over by HHJ Jeffrey Burke QC,
decided that the issue of what was or was not an activity was a matter of
fact. The same approach was taken by Enterprise Management Services Ltd v
Connect‑Up Ltd [2012] IRLR 190, a decision of
HHJ Peter Clark. The question is essentially a question of fact and
degree. The approach of HHJ Jeffrey Burke QC in Churchill Dulwich
that there should be a straightforward and commonsense application of the
relevant statutory words to the individual circumstances (paragraph 28)
was expressly adopted by HHJ Richardson in the Appeal Tribunal in Taurus Group Ltd v Crofts & Anor
UKEAT/0024/12, 22 May 2012; see in particular paragraph 28, in
which he recorded:
“As a general rule the Appeal Tribunal will follow its own
decisions, particularly where they are considered decisions after argument on
the point, and where there are no conflicting appellate decisions.”
21.
He went on to say that Churchill Dulwich was one such
case. I am entirely satisfied by those authorities and by Hambley,
which came before me, that the question of what are the relevant activities is
one for the Tribunal to define. Providing that the legal approach is correct
and the conclusion not perverse, its finding on fact must be respected.
22.
As to “activities”, the common use of the word is to describe what is
being done. If there is a relevant distinction between the nature of
activities and the purpose of them, it is to the nature of the activities that
the statute primarily looks. There may be some cases in which the purpose of
the activities is such that the whole nature of the activities is shaped by
that purpose, such that activities with that purpose may be said to be distinct
from similar activities with a very different purpose, but it cannot in my view
be said that this is necessarily such a case; the conclusion to which the
Tribunal came in respect of activities was a conclusion of fact, it was within
the scope of permissible findings of fact and degree, and there seems to be
nothing wrong in concluding that the activity of disposing of the contracts was
the same essentially whether performed by the Claimant in‑house or by
Dentons outsourced. I therefore reject that ground of appeal.
23.
The second ground of appeal, however, does involve to some extent a
consideration of purpose where the definition of “activities” does not. The
wording of 3(b)(i) looks to activities, “that cease to be carried out by a
client on his own behalf”. Those last four words indicate something of
purpose, or, it may be better described, of relationship. The client is
plainly one and the same person as that expression is used throughout
Regulation 3. That was the conclusion to which this Tribunal, presided
over by Slade J, came in the case of Hunter v McCarrick
[2012] IRLR 274. There she concluded for the Tribunal that for there to be a
service provision change within the meaning of Regulation 3(1)(b), the
activities carried out by different contractors before and after the transfer
must be carried out for the same client. There was no warrant for adopting an
interpretation other than that required by the ordinary meaning of the language
used: “[…] the client in Regulation 3(b)(i) and (ii) refers back to a
specific client”. “There is no warrant”, she held, for giving the words “a
client” and “the client” different meanings in the different sub‑paragraphs
of Regulation 3(1)(b).
24.
In this appeal, Mr Reade QC relies upon those observations;
Mr Harris does not dispute them. Accordingly, the need, submitted
Mr Reade, was to identify one client. He argued that taking into account
the approach of the Court of Appeal in De’Antiquis and the IA
1986, Schedule B1, one would come inevitably to the conclusion
expressed by Hildyard J in the case of Edenwest Ltd v CMS Cameron McKenna (a
firm) [2012] EWHC 1258, a decision in the Chancery Division, where at
paragraph 73 he said that:
“[…] ordinarily at least, an adviser instructed by receivers in
their own name, whether before (when they have no choice) or after their
appointment (when they could contract in the name of the company), will not,
without more, be or become parties to a retainer with the company in
receivership upon the appointment of such receivers as its agents.”
25.
I shall return to that authority. The IA 1986 relevantly
provides at Schedule B1, paragraph 3(2), for the purpose of the
administrator in performing his functions; that is to act in the interests of
the company’s creditors as a whole. His status (paragraph 5) is as an
officer of the court. By paragraph 49 the administrator is to make a
statement setting out proposals for achieving the purpose of administration and
must in effect achieve those proposals in the course of the administration.
The administrator has a general power (paragraph 59) to do anything
necessary or expedient for the management of the affairs, business and property
of the company and (paragraph 68) shall manage the company’s affairs,
business and property in accordance with any proposals that have been approved
under paragraph 53 as a result of an initial creditors’ meeting and any
revision of those proposals provided for by the Act. At paragraph 69 it
is provided, “In exercising his functions under this Schedule the administrator
of a company acts as its agent”.
26.
It is to that point that he addressed attention to Edenwest.
Edenwest did not concern administrators; it concerned
administrative receivers. Although Mr Harris in the course of argument pointed
to a couple of distinctions in practical terms between the role of
administrative receiver and administrator of a company in administration, he
did not argue that there was any relevant distinction for the purposes of
determining the effect of declaring an administrator agent of the company just
as an administrative receiver is determined an agent in the legislation
applicable to such a status.
27.
The Edenwest case concerned the desire of a company to sue
solicitors acting for its administrative receiver. In outline, the company had
owned premises that were damaged by fire. The question arose whether insurance
brokers had been negligent in failing to make disclosure to the insurer for
want of which the policy of insurance was avoided. A bank had an interest as
mortgagee; administrative receivers were appointed by it, who retained the
services of Cameron McKenna. After the sale of the property that had been fire‑damaged,
the question arose whether Cameron McKenna should have pursued a claim in
negligence against the insurance broker. It was alleged that that firm owed
the company a contractual or tortious duty. In the present circumstances,
Mr Reade contended that only the contractual duty was of relevance. The
case made for the defendant was that it denied ever having been retained by the
claimant company and denied therefore that it owed any contractual duty. The
claim against it was dependent upon establishing that Cameron McKenna became
party to a contract of retainer with the company under which it was required to
advise the company with respect to the claims. The claimant’s case was that it
did so because the receivers were its agents and as solicitors to the receiver
the solicitor was in a relationship with the company requiring it to give such
advice.
28.
This led Hildyard J at paragraphs 60‑75 to ask what
relevant legal principles applied. He concluded that although agency was a
commonplace description and in context technically correct so far as the
administrative receiver was concerned, it was apt to give a somewhat false
impression. The relationship between receiver and company in receivership had
unusual features, to which he drew attention in particular at
paragraphs 62 and 63. At paragraph 65 he noted:
“[…] the statement that receivers […] acted as agents of the
mortgagor company […] might suggest, at first blush, that everything a receiver
does, he does on behalf of the company. That may be so in the ordinary course
where the act involved is plainly on behalf of the company, as where an
administrator instructs solicitors to act on behalf of the company in
administration […]. But that is not so in every case. Receivers not only have
other (non‑agency) powers; but also, the fact that they may contract as
agent for the company does not mean that every contract made by a receiver is
to be treated as a contract with the company. The question in every case is
whether the specific contract was one that the receiver intended or must be
taken to have made on behalf of the company or on his own behalf (albeit in the
exercise of his receivership functions).”
29.
That last sentence, it seems to me, expresses the principle that the
Judge adopted. At paragraph 69 he observed that in the case then before
him neither the fact that the administrative receivers became upon their
appointment agents of the claimant nor even the fact that they sought and
obtained advice from the defendant as to the exercise of their powers in
binding the claimant to the contract of sale necessarily connoted that in so
seeking and obtaining that advice they were seeking and obtaining advice on
behalf of the claimant. The Judge observed that it was a question of fact,
including of course inferences from primary facts, whether as regards a
particular issue or area or advice they were seeking such advice in exercise of
their duties to the mortgagee and/or for their own protection, for example to
ensure that they were fulfilling their duties to the mortgagee and/or
mortgagor, or whether they were obtaining advice on behalf of the claimant
itself.
30.
That then led to the summary, part of which I have already touched on,
under the hearing “Relevant legal principles: contracting with third parties”,
between paragraphs 73 and 75. After 73, which I have cited, he
said:
“74. Putting it another way, bringing the company into a
contractual relationship would require some specific act or instruction by its
agent(s), and acceptance of the retainer by the adviser: it is not the
automatic effect of the receiver or administrative receiver becoming an agent
of the company.
75. If it were otherwise it seems to me that in every case where
a solicitor’s firm is instructed by an administrative receiver who (in the
ordinary way) is appointed as the company’s agent, the firm would be treated as
retained by the company; and I cannot think that is right. It would, for
example, make a nonsense of the clear legal distinction between the duties of a
receiver and the duties of company management and require the solicitor to
serve two masters (the mortgagee and the administrative receiver who owes his
primary duty to it on the one hand, and the mortgagor company, on the other
hand) who have, or may well have, different objectives.”
31.
He added at paragraph 76 that it was clear there was a likely or
potential conflict of interest, inherent in the fact that the receiver owed a
primary duty not to the company as its principal but to the debenture holder
who appointed him, and in managing or selling the company’s property acted as
receiver and manager for the debenture holder and not as manager of the
company.
32.
It is entirely understandable that that case was not cited to the
Employment Tribunal, for it is a decision reached in the summer of 2012,
whereas the Tribunal was in the autumn of 2011, but it highlights the
contentions that Mr Reade made. He argued that the statutory words
required the activities to be carried out on the client’s behalf. If here the
client is to be taken as Dentons or Deloittes, then the Claimant could not
succeed. The Claimant had to contend that the client was JAS. The work done,
submitted Mr Reade, was in context done and could only have been seen to
have been done on behalf of the administrators by Dentons, whereas it was done
on behalf of JAS by the Claimant. Thus, applying Hunter, there
could here be no service provision change; the clients were different.
33.
He submitted that there was a clear distinction between the
administrators arranging by contract with a firm of solicitors for that firm of
solicitors to convey property on behalf of a company in administration (those
solicitors instructed by the administrators for the company would be acting on
behalf of the company) and those solicitors appointed to advise and act for the
administrators as administrators who, just as were Cameron McKenna in the Edenwest
case, would be acting on behalf of the administrators and not the company in
receivership or administration. It was not sufficient for the Judge here to
say that the position could be viewed by stepping back from the legal
formalities and analysing it in the round, as she did at paragraph 57, coming
to the conclusion that Dentons were providing legal services to JAS for the
administrators managing JAS.
34.
I note, as it happens, that that is a mis‑statement of the
relationship on any view, because it is said there that Dentons were providing
legal services to JAS on behalf of the administrators. If so, they would be
acting on behalf of the administrators and not, as the decision continues to
suggest, acting on behalf of JAS. That is the force of the words “for the
administrators” in that particular sentence. But in any event Mr Reade
suggests that this ignores the fact that the overriding duty of the
administrators was to the creditors. The creditors might be in conflict with
the company. A solicitor’s firm could not be put into a position in which a
solicitor would have two masters. It could not be forced into a position of
conflict. In that situation, the solicitor could never be said to have had a
retainer with the company in administration. Although it would act in the
administration in activities very much concerned with the company and its
affairs, that was to be distinguished from acting on behalf of the company,
which it would not do. The argument that it did, based upon the fact of agency
(see paragraphs 57 and 65 of the Employment Judge’s reasoning)
regarded agency in this context as being no different a concept than normal
contractual agency. It should have been interpreted as meaning that the
administrator in performing its functions was able to bring the company into
contract with third parties; it did not have the result (see Hildyard J)
that everything that the administrator did in the administration was to be
regarded as being done as agent for the company and on the company’s behalf.
35.
As against that, Mr Harris argues that this produces an absolutist
position. It would have the result that there never could be a service
provision change constituted by those activities which had been performed by a
company being continued in the hands of a contractor to the administrator of
that company if the company should go into administration. He argued that
there was nothing in TUPE that required the purposes of the activities in the
different hands to be identical. There was a clear distinction between the
ongoing activities of the company, which was drawn here by the Employment
Judge, in respect of which the distinction between the administrator and the
company was irrelevant, and those matters that were discrete, in which, for
instance, Dentons would advise the administrators as to the exercise of their
powers as such. That would have nothing to do with the company, but, points
out Mr Harris, the Employment Judge was clear in making that distinction.
The observations made by the Court of Appeal in De’Antiquis were
of no assistance. It was, he submitted, quite clear that the contract made
here by Dentons in respect of the disposal of service contracts was made on
behalf of the company. The company had been doing just that work for itself
before the purported service provision change; nothing in substance altered
thereafter.
36.
Both advocates addressed me upon the consequences of finding in their
opponents’ favour: Mr Reade that this case was of importance generally to
administrators, who would never but for this case have anticipated that those
whom they engage as professional advisers could be obliged to take into service
members of the company’s workforce whom they might only shortly after becoming
administrators have thought themselves entitled to dismiss by reason of
redundancy. If there had been such a dismissal, he points out, being related
to a service provision change it would automatically be unfair; that burden
would fall, such is the nature of the Regulations, upon the professional firm
concerned. That consequence, he argued, was unexpected and undesirable.
37.
For the Claimant, it was submitted that everything must turn upon its
facts. The chances of there being an employee such as was the Claimant in this
case, engaged in activity that would be replicated by a professional adviser of
the administrator, was small; the importance should not be overstated. Mr
Harris’s argument was I hope not unfairly summarised by suggesting that what
was presented to the court as opening the floodgates was no more than allowing
a trickle from a dripping tap.
38.
This court will accept in general decisions of courts of commensurate
jurisdiction. Though not bound by Hildyard J’s decision nor by that of Hunter,
I accept that I should follow those decisions unless satisfied that they are
wrong. I am not so satisfied. It follows that I should conclude that the
agency provided for by the IA 1986 is of a design peculiar to its
purpose. I accept that for solicitors engaged by retainer to act for the
administrators to be held to be acting on behalf of the company because the
administrators are in the exercise of many of their functions acting so as to
bind the company could potentially bring those solicitors into a situation of
conflict that militates against the proposition being correct. Although for
much of the time, and particularly if the first and primary purpose of
administration is to be achieved, the administrator and the company will have a
common purpose, the administrator owes his duty, as Rimer LJ points out,
to the creditors of the company.
39.
I therefore accept the argument that on the facts of this case on this
appeal the Tribunal was in error in concluding that merely because the
administrator could act as agent, and in exercise of its functions as
administrator did act as agent, for the company, it meant that the solicitors
retained by the administrator were themselves acting on behalf of the company when
they acted in the administration. They might have been, but it could not be
assumed that they necessarily did. It was the making of that assumption that
seems to me the error of the Employment Judge; as I say, an error that is
excusable given the fact that both De’Antiquis and Edenwest
have been decisions of more recent origin.
40.
Accordingly, on this ground in this case, and specifically without
necessarily broadening the base for my decision to every case in which an
administrator employs a professional adviser, I have concluded that the
argument put to me on the “client” ground of appeal is well founded.
41.
I turn to the third argument, which is a further and separate ground for
allowing this appeal. It is that the Tribunal was in error in its approach to
determining whether Regulation 3(3)(a) was satisfied. It is not necessary
for me in approaching this to determine the interesting but somewhat
theological question of whether the draughtsman of the statute intended the
words “a single specific event” to be qualified by “of short‑term
duration” as well as the word “task”; that is a perfectly permissible way of
reading the sub‑paragraph, but so too is it on the face of it a
permissible reading to read “a single specific event” as standing on its own
and the words “of short‑term duration” to be linked to the word “task”
alone. If it were relevant to express a preference, mine would be for that advanced
by Mr Harris, which is that the “short‑term duration” covers both
events, and I would do so because it seemed to me that the point here is
essentially one of time and permanence. The context is employment; an
impermanent employment which is anticipated is unlikely to have the consequence
of the transfer Regulations being applied, but a single specific event might be
of very considerable duration. It is possible to think of several such
examples.
42.
The reason why it is unnecessary to determine that in this case is that
both, as it seems to me, look to something that is of limited duration. If it
were necessary, and I do not think in this case it is, to determine the scope
of “short‑term duration”, i.e. to ask what length of time is involved,
then I have on the one hand the submission made by Mr Reade that because
by statute administration must be completed within a year with an exceptional
six‑month addition to follow, such that that is inevitably short‑term,
and that of Mr Harris, which is that one should have regard to the context
of employment law and employment relationships as a whole within which to make
the assessment.
43.
In case this particular point goes further, given the outstanding
appeals, I am told, in respect of both Hunter and De’Antiquis,
and, for that matter, the very recent currency of Edenwest, I
should perhaps say something of my conclusions. They are these, but
tentatively advanced for the reasons I have given. First, what is short‑term
or long‑term is inevitably a matter of perspective. Perspective depends
entirely upon the viewer. The view to be taken here in what is an avowedly
employment context is, it seems to me, that of the employee and not that of the
historian for whom short‑term duration may be a very much longer period.
It cannot be so short‑term as to suggest that it is of no great relevance
to consider whether there should be a transfer under TUPE or not; that suggests
that a length of time of more than a few weeks will undoubtedly still be
capable of falling within “short‑term duration”. But it seems to me that
the broader context is that of employment relationships as a whole, in which
such guidelines, as they are, are that at the time that the Regulations were
made it would take a year for an employee to obtain employment rights other
than those in respect of automatic dismissals, but similarly an employee might
expect to receive at the most 12 weeks’ notice from his employer and could in
some circumstances give as little as 1 week to him. He would have three months
within which to appeal a finding of unfair dismissal.
44.
All these are capable of creating a context within which “short term”
may be judged, but it seems to me that there is more than just the general
employment context; there is necessarily the context of the particular
employment and the particular relationships. That must vary, inevitably, from
case to case. It will be, inevitably, therefore to some extent a matter of
fact and degree, and, providing the Tribunal has regard to the words of the
paragraph and the general context within which to place the particular facts of
the case, a finding of fact and degree is unlikely ever to be wrong.
45.
As to the wording, however, of the Regulation, it is this, in
combination with the way in which the Tribunal dealt with the issue, that seems
to me to give rise to an unanswerable case that the appeal must on this ground
be allowed. Whereas the textbooks appear to focus just upon the questions of
time – “single specific event” or “short‑term duration” – and the intriguing
but ultimately unhelpful question as to whether they are both or just one
governed by the words “short‑term duration”, it is to the wording of the
legislation that regard must be had. The paragraph begins not with a statement
that those changes, which will operate only in connection with a single
specific event or a task of short‑term duration are excluded, but that
that is the intention of the client. The governing words in paragraph 3(a)(ii)
are “the client intends”; therefore the primary finding of fact that the
Tribunal is called upon to make is as to the intention of the client. It may
often be, as Mr Harris submitted, self‑evident what the intention
will have been, but a Tribunal must, in my view, show that it recognises that
it is not dealing with an objective standard. It is dealing with the
anticipation or intention of the client; not the transferee, but the client.
46.
Here, the Tribunal did not ever determine what particular length of time
it had in mind, but, having determined what the activities were – that is, the
disposal of the service contracts – it appears in paragraph 68 to have
shifted to regarding the services somehow as those of providing legal services
for JAS. Those were not the activities that were to be subject to the putative
change. In paragraph 69 it said:
“[…] it seems to me that insofar as the claimant was engaged on
activities providing legal services to JAS, those activities could have
continued after the end of administration and it was not at all clear this was
in prospect a short‑term specific task […].”
47.
This phrase has within it therefore a second error. It was looking not
at the actual activities to be performed by the Claimant but activities that
were not part of the service provision change. The fact that other activities
that the Claimant was not doing, relevantly, could have continued for a length
of time is beside the point, but one is left with a very clear impression that
it was upon this possibility that the Tribunal focused in determining whether
there was or was not a short‑term or long‑term task. In other
words, if the Tribunal had been persuaded that the activities would all by and
large have been completed within the three months following
1 April 2010, it might appear the Tribunal would have been inclined
to hold that that was a single specific event or task of short‑term
duration; more likely, I suspect, to be the latter, which looks at the work,
whereas “specific event” looks rather at an objective description of the
outcome of work or the object of work.
48.
Accordingly, it seems to me, in the absence of any clear statement as to
what term the Tribunal had in mind and why, the Tribunal’s Judgment on this
cannot stand. Mr Harris in his attractive and realistic submissions
accepted that that passage caused a problem for his argument, and he accepted
that the Tribunal had never specified the time within which the actual work of
disposing of contract continued. He observed, rightly, that the actual time
did not in itself matter if what was in issue was the intention of the client
as to what should be the period of time. That is what the Regulation
provides. But there was here no evidence given by the client; JAS, though
nominally a party, took no part in the proceedings, and no witness from JAS was
called. The only way in which the intention could be determined was thus by
inference, and it seems to me that the only grounds for drawing any inference
would be that the intention corresponded with the event, as to which, as I have
indicated, the evidence varied and the Tribunal made no finding.
Conclusion
49.
It follows that on both the grounds as to “client” and “term” this
appeal succeeds, though it fails in so far as the argument considered the scope
of the word “activities”. I shall hear counsel as to the consequences of this
decision.
Disposal
50.
In my view, if the matter had been only that of the question of time, I
would have remitted this case to a Tribunal for determination and I would have
heard argument as to whether that should be the same or a different Tribunal.
On the issue as to client, however, it seems to me that on the material before
me and the arguments, and given the state of the authorities, that I should
substitute a decision that there was no service provision change.
