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IN THE SUPREME COURT OF JUDICATURE No EATRF 1998/0841/3

Royal Courts of Justice

Strand

London WC2

Tuesday, 20th July 1999

B e f o r e:

LORD JUSTICE PETER GIBSON

LORD JUSTICE WARD

LORD JUSTICE CHADWICK

GOVERNING BODY OF CLIFTON MIDDLE SCHOOL and Others

- v -

ASKEW

Handed down judgment

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 421 4040

Official Shorthand Writers to the Court)

MR T LINDEN (Instructed by Graham Clayton of London) appeared on behalf of the Appellant

MR P OLDHAM (Instructed by Richard Polson of London) appeared on behalf of the Respondent

J U D G M E N T

(As Approved by the Court )

(Crown Copyright)

LORD JUSTICE PETER GIBSON: The Applicant, Christopher Askew, is a teacher. The Third Respondents, the London Borough of Ealing (“the Council”), are the local education authority (“LEA”) in Ealing and were his employers. In the early 1990s the Council operated a three-tier structure of schools, viz. First Schools for children aged between 4 and 7, Middle Schools for children aged between 8 and 12 and Secondary Schools for children aged 13 upwards. All those schools were maintained county schools within the meaning of the Acts then in force, the Education Act 1980 (“the 1980 Act”) and the Education Reform Act 1988 (“the 1988 Act”). Each school had its own Governing Body, its own head teacher and its own staff of teachers. The teachers at each school were the employees of the Council but were appointed by the Council on the nomination of the Governing Body of the school. Mr. Askew was employed by the Council from January 1988 to teach solely in Clifton Middle School, the Governing Body of which (“the Old Governing Body”) are the First Respondents. Mr. Askew taught French to year 7 pupils (aged 11 to 12) though he could be required under his contract to teach other year pupils in the Middle School and other subjects.

The Council in 1993, with the approval of the Secretary of State, reorganised their schools. There was to be a two-tier structure, First Schools and Middle Schools being replaced by Primary Schools, save that children in year 7 would go to Secondary Schools. The reorganisation was effected in accordance with s. 12 of the 1980 Act. This provides, so far as relevant, that where a LEA intend to cease to maintain any county school they should publish their proposals and follow a prescribed procedure, and if the proposals are approved by the Secretary of State, it is the LEA’s duty to implement them. The Council duly complied with s. 12 and obtained that approval in relation to the cesser of maintenance of Clifton First School and Clifton Middle School on 31 August 1993. They were to be replaced on 1 September 1993 by a new Primary School, Clifton Primary School, the governing body of which (“the New Governing Body”) are the Second Respondents. Before the new Primary School was opened, it had a temporary governing body, whose functions included interviewing teachers for the new Primary School.

S. 44(3) of the 1988 Act provides that the appointment and dismissal of staff at a county school with a delegated budget are to be subject to Sch. 3 of that Act. Both Clifton Middle School and Clifton Primary School are such schools. By para. 8 of Sch. 3 to the 1988 Act, where the governing body of a school determine that any person employed to work at the school should cease to work there, they must notify the LEA, and if that person is employed to work solely at the school and does not resign, the LEA must terminate that person’s contract of employment. The Old Governing Body made a determination that Mr. Askew should cease to work at Clifton Middle School and the Council gave him notice in May 1993 that his employment with the Council was terminated with effect from 31 August 1993 on the ground of redundancy because of the closure of that school. Mr. Askew exercised a right of appeal to the Old Governing Body , but the appeal failed.

Mr. Askew applied to work at Clifton Primary School. By para. 2 of Sch. 3 to the 1988 Act it is for the governing body of a school to interview applicants for a vacant post at the school and, where they consider it appropriate to do so, to recommend to the LEA for appointment an interviewed applicant, whereupon the LEA is obliged to appoint the person so recommended unless he does not meet any staff qualification requirements. By para. 4(2) of Sch. 4 to the 1988 Act the provisions of s. 44 and Sch. 3 apply in the case of a new school for the purposes of the appointment of staff at the school, and in the case of a new school which has a temporary governing body, that body have the functions of the governing body of the school. Mr. Askew was interviewed by the temporary governing body of Clifton Primary School, but they did not recommend him for appointment.

Mr. Askew obtained another job with the Council as a teacher, but a temporary one only. He applied to an Industrial Tribunal, complaining of unfair dismissal. He sought neither reinstatement nor compensation but only a declaration that he was unfairly dismissed. He joined the Old Governing Body, the New Governing Body and the Council as respondents to that application. He contended that it was wrong to say that Clifton Middle School had closed when it continued to exist for all practical purposes within a larger unit under a new name. In the alternative he advanced an argument that he had been dismissed unfairly by reason of a transfer contrary to the Transfer of Undertakings (Protection of Employment) Regulations 1981 (“TUPE”) and the Acquired Rights Directive 77/187/EEC (“the Directive”). His application was resisted by the Respondents on a number of grounds, including that he had been fairly dismissed for redundancy and that TUPE and the Directive could not apply as there has been no transfer of an undertaking from one employer to another.

By Art. 3 of the Education (Modification of Enactments Relating to Employment) Order 1989 (“the 1989 Order”), since replaced in substantially similar terms, Part V of the Employment Protection (Consolidation) Act 1978 (“the 1978 Act”), now replaced by the Employment Rights Act 1996, which relates to unfair dismissal, in its application to governing bodies with delegated budgets is to have effect as if

“(a) any reference .... to an employer .... included a reference to the governing body acting in the exercise of their employment powers and as if that governing body has at all material times been such an employer ....;

(b) in relation to the exercise of the governing body’s employment powers, employment by the [LEA] at a school .... were employment by the governing body of that school ....;

(c) references to employees were references to employees at the school .... in question;

(d) references to dismissal by an employer governing body included references to dismissal by the [LEA] following notification of a determination by a governing body under paragraph 8(1) of Schedule 3 to .... [the 1988 Act].”

The term “employment powers” was defined to include powers as to appointment and dismissal of staff conferred by s. 44 of and Sch. 3 and para. 4 of Sch. 4 to the 1988 Act.

By Article 4:

“Without prejudice to the generality of article 3, where an employee at a school .... with a governing body with a delegated budget is dismissed by the [LEA] following notification of such a determination as is mentioned in article 3(1)(d) above -

....

(b) Part V of [the 1978 Act] shall have effect in relation to the dismissal as if the governing body had dismissed him, and the reason or principal reasons for which the governing body did so had been the reason or principal reason for which they made their determination.”

Art. 6 relates to applications to industrial tribunals. By Art. 6(2) the application is to be made and the proceedings are to be carried on against the governing body, though by Art. 6(3) the orders made (other than for reinstatement or reengagement) are to have effect as if made against the LEA.

The Directive is by Art. 1(1) expressed to apply to “the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger”. By Art. 2(a) “transferor” is defined as meaning any natural or legal person who, by reason of a transfer within Art. 1(1), ceases to be the employer in respect of the undertaking, business or part of the business, and “transferee” is defined correspondingly. Art. 3(1) provides that the transferor’s rights and obligations arising from a contract of employment or from an employment relationship shall by means of the transfer be transferred to the transferee. Art. 4(1) provides that the transfer of an undertaking, business or part of a business shall not in itself constitute grounds for dismissal by the transferor or the transferee, but that that provision shall not stand in the way of dismissals that may take place “for economic, technical or organizational reasons entailing changes in the work-force”. There are other references in Art. 3(1) and Art. 4(2) to an employment relationship in the alternative to a contract of employment.

By TUPE the United Kingdom implemented the Directive. By Reg. 2(1) of TUPE: “ ‘contract of employment’ means any agreement between an employee and his employer determining the terms and conditions of his employment;

‘employee’ means any individual who works for another person whether under a contract of service or apprenticeship or otherwise but does not include anyone who provides services under a contract for services and references to a person’s employer shall be construed accordingly”.

Reg. 3(1) provides that TUPE applies to “a transfer from one person to another of an undertaking”. The term “undertaking” by Reg. 2(1) includes any trade or business. By Reg. 5(1) a relevant transfer is not to operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred, but any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee. Reg. 5(2)(a) provides that on the completion of a relevant transfer all the transferor’s rights, powers, duties and liabilities under or in connection with any such contract shall be transferred to the transferee. By Reg. 5(2)(b) anything done before the transfer is completed by or in relation to the transfer in respect of that contract or a person employed in that undertaking or part shall be deemed to have been done by or in relation to the transferee. Reg. 8(1) provides that where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee shall be treated for the purposes of Part V of the 1978 Act as unfairly dismissed if the transfer or a reason connected with it is the reason or principal reason for his dismissal. Where an economic, technical or organisational reason entailing changes in the work-force of either the transferor or the transferee before or after a relevant transfer is the reason or principal reason for dismissing an employee Reg. 8(1) is not to apply to his dismissal, but the dismissal is to be regarded for the purposes of s. 57(1)(b) of the 1978 Act (requiring the employer to show that the reason for dismissal was substantial and of a kind to justify the dismissal) as having been for a substantial reason of a kind such as to justify dismissal.

Before the Industrial Tribunal it was accepted by Mr. Askew that if the Old Governing Body was the proper body to deal with redundancy they had done so fairly. But it was submitted for Mr. Askew that in reality what occurred was an amalgamation of the First and Middle Schools coupled with the removal of the top year group of the Middle School. This was accepted by the Tribunal which said that there was no closure of the Middle School, the amalgamation was not a ground for dismissal and the correct procedures were not operated because the New Governing Body should have decided whether there was a redundancy and they should have selected for redundancy. The Tribunal said that it was not satisfied that there was a reduced requirement for teachers in Clifton Primary School. It therefore held that the dismissal was unfair and so declared on 12 July 1995.

The Respondents appealed and on 11 February 1997 their appeal was allowed by the Employment Appeal Tribunal, Kirkwood J. presiding. It held that there was a closure of Clifton Middle School, the Old Governing Body ceasing to exist after 31 August 1993, and the New Governing Body, including the temporary governing body for Clifton Primary School, having no power to decide questions of redundancy in Clifton Middle School. It also held that the Tribunal misdirected itself in importing the term “amalgamation”. It held that Mr. Askew was correctly dismissed by reason of redundancy by the Old Governing Body and that the dismissal was fair.

Mr. Askew had taken a further point under TUPE which the Appeal Tribunal noted in its judgment but said that it had insufficient time to hear the argument on the point and further that a possibly relevant decision of the European Court of Justice was then awaited. That part of the appeal was adjourned and came before a differently constituted Appeal Tribunal, His Honour Judge Peter Clark presiding. Although this point had not been determined by the Industrial Tribunal, the second Appeal Tribunal allowed it to be argued. It held that there was no relevant transfer such as to give rise to a potentially unfair dismissal under Regulation 8 of TUPE. That made it unnecessary for it to rule on a further argument by the Respondents that Mr Askew was dismissed for an economic, technical or organisational reason. It therefore dismissed Mr. Askew’s complaint of unfair dismissal.

Leave for Mr. Askew to appeal was refused by the Appeal Tribunal and by Beldam L.J. on paper. But on a renewed application leave was given by Nourse and Aldous L.JJ. Before us Mr. Linden for Mr. Askew submitted that one or other of two analyses must be right: either there was continuity as to the identity of Mr. Askew’s employer, or if that identity did change at what Mr. Linden called “the moment of merger” and Mr. Askew was employed before that moment by the Old Governing Body and thereafter by the New Governing Body, his rights when employed by the Old Governing Body should have automatically transferred to the New Governing Body by operation of the Directive and TUPE.

I shall consider each analysis in turn.

Mr Linden submitted that the first Appeal Tribunal erred in assuming that when the Council formed and carried through their intention to “cease to maintain” Clifton First and Middle Schools, that meant closing educational institutions. He said that to cease to maintain them might result in closing them or it might mean no more than ceasing to maintain two institutions as separate units, and continuing to provide the education which they had provided in a single merged unit. He argued that the latter was what occurred in substance, that on the merger the powers of the old governing bodies also merged and became jointly the powers of the New Governing Body; hence, the New Governing Body could not decide whether to appoint Mr. Askew as a new employee, because he was one of the employees for whom it automatically acquired responsibility as a result of the merger of the responsibilities of the two old governing bodies, and so the New Governing Body could only consider whether or not to dismiss Mr. Askew for redundancy.

In my judgment these submissions are unsustainable in the light of the statutory scheme. The descriptions of what occurred as an “amalgamation” and a “merger of responsibilities” are those of Mr. Askew and his advisers. They are not to be found in the statutory provisions. It is plain that the scheme does not make special provision for amalgamations of schools or mergers of responsibilities. S. 12 of the 1980 Act provides the only mechanisms by which county schools can be established or discontinued. It also provides the mechanism for making a significant change to a county school, but that was not what the Council chose to do. Instead they opted for the cesser of maintenance of Clifton First and Middle Schools on 31 August 1993 and once their proposals received the approval of the Secretary of State they were bound to implement them. On the cesser of maintenance neither school could in practice continue to exist nor could its governing bodies perform any function after that date. Because of s. 44 of and Sch. 3 to the 1988 Act the Old Governing Body had the right to recommend the dismissal of persons working solely at the Clifton First or Middle School and their recommendations had to be complied with by the Council. Because of the cesser of maintenance it was inevitable that the Old Governing Body would have to recommend the dismissal of their teaching staff, and the Council had to give effect to their recommendations. The New Governing Body are a body distinct from the governing bodies of Clifton First or Middle Schools. It was for them, or more accurately for the temporary governing body of Clifton Primary School at the relevant time, to make recommendations for the employment of staff at their school. They had no function whatsoever in relation to the dismissal of staff of the First or Middle Schools. By reason of the 1989 Order it is plain that in determining whether the dismissal of Mr. Askew was fair or unfair for the purposes of s. 57 of the 1978 Act, one looks at what the Old Governing Body did and for what reason. It is equally plain that Mr. Askew was dismissed for redundancy or for some other substantial reason (viz. the reorganisation with its statutory consequences) justifying the dismissal. It was not disputed that on this basis the dismissal was handled fairly.

It follows that in my judgment the Industrial Tribunal was clearly wrong and the first Appeal Tribunal was correct in its decision.

The second Appeal Tribunal found that there was an undertaking capable of being transferred when Clifton First and Middle schools ceased to operate and Clifton Primary School commenced. That was challenged by the Respondents by a Respondent’s Notice, but the point is no longer pursued.

The reasoning of the second Appeal Tribunal was as follows. First, where a person is employed under a contract of service, as Mr. Askew was with the Council, that person cannot also work for a governing body which are not his employers so as to fall within the definition, in Reg. 2(1) of TUPE, of an “employee”. Second, the reference to “or otherwise” in the phrase “any individual who works for another person whether under a contract of service or apprenticeship or otherwise” means “otherwise under a contract” and does not relate to the words “works for any other person”. Third, Mr. Askew must be able to rely upon the preservation by Reg. 5(1) of his contract of employment following a relevant transfer to come within the protection of Reg. 8 against being unfairly dismissed, but cannot do so.

Mr. Linden submitted that that Appeal Tribunal erred in law in finding that there could not have been a relevant transfer for the purposes of Reg. 3(1) of TUPE. He pointed to the words in Art. 3(1) of the Directive, “rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer”, and to the words in the definition of ‘employee’ in Reg. 2(1) of TUPE, “ who works for another person whether under a contract of service or apprenticeship or otherwise ” (emphasis added). He contrasted that with the definition of “employee” to be found in other legislation affecting employees such as s. 153(1) of the 1978 Act, which makes clear that a contract is required if a person is to be an employee. He rightly said that TUPE must be construed so as to give effect if possible to the purpose of safeguarding employees’ rights effectively (see, for example, Litster v Forth Dry Dock Co. Ltd . [1990] 1 AC 546 at pp. 559 and 562 per Lord Oliver). He said that the second Appeal Tribunal failed to adopt a purposive approach to the construction of Reg. 3(1) and to the definition of “employee” in Reg. 2(1). He submitted that the focus should be on the substance and not the form in applying the test whether there was a change in the person responsible for carrying on the undertaking. He argued that the governing body of a school with a delegated budget carry on the business of the school, being responsible for providing the services of the school. He referred to the 1989 Order, treating the relevant governing body as the employers for unfair dismissal claims, and to the fact that governing bodies have wide-ranging powers of management. He said that the second Appeal Tribunal erred in considering itself bound by a narrow contractual analysis and in not considering the reality of the situation. He contended that Mr. Askew had an employment relationship with the Old Governing Body and on the transfer of the undertaking on the opening of Clifton Primary School the New Governing Body were the transferees for the purposes of the Directive and TUPE. The Old Governing Body dismissed Mr. Askew unfairly, he submitted, because they dismissed him by reason of the transfer; what should have happened was that the obligation to employ him was transferred to the New Governing Body, who would then have had to take the decision whether to dismiss him for redundancy.

I acknowledge the force of these submissions, attractively advanced as they were by Mr. Linden. English courts have constantly to be on their guard against too insular an approach to the construction of European legislative instruments and of statutes and regulations giving effect to European obligations. As Advocate-General Sir Gordon Slynn said in Spijkers v Benedik [1986] ECR 1119 at p. 1112 in the context of transfers of undertakings, “Technical rules are to be avoided and the substance matters more than the form .... A realistic and robust view must be taken and all the facts be considered.” But the difficulty lies in fitting the circumstances of the present case within the scope of the Directive or TUPE.

I start with the Directive which the Respondents accept for the purposes of this appeal is directly enforceable against them by Mr. Askew. (They reserve the right to argue otherwise on a further appeal.) Its purpose is explained by its recitals:

“Whereas economic trends are bringing in their wake at both national and Community level, changes in the structure of undertakings, through transfers of undertakings, businesses or parts of businesses to other employers as a result of legal transfers or mergers;

Whereas it is necessary to provide for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded;

Whereas differences still remain in the Member States as regards the extent of the protection of employees in this respect and these differences should be reduced”.

It is thus apparent that what was in contemplation was the protection of employees and the safeguarding of their rights in the event of a change of employer through a relevant transfer. That the relevant employees had to be employees of the transferor is made plain by the definition of “transferor” in Art. 2, with “transferee” given a corresponding meaning. As was said by the European Court of Justice in Redmond Stichting v Hendrikus Bartol [1992] E.C.R. 1-3189 at p. 1-3127 para. 11 (and has been repeated verbatim in other judgments of that court):

“the directive is applicable wherever, in the context of contractual relations, there is a change in the natural or legal person who is responsible for carrying on the business and who incurs the obligations of an employer towards employees of the undertaking”.

The Directive refers to both a contract of employment and an employment relationship; the latter term must therefore go wider than the former. But neither term is defined in the Directive, and there has been some discussion before us as to whether an employment relationship must be a contractual relationship. Mr. Oldham for the Respondent pointed to the words of the European Court of Justice as to the applicability of the Directive wherever “in the context of contractual relationships” the employer changes. Mr. Linden submitted that those words were not directed to the relationship between employers and employees but to that between transferor and transferee. Whichever is correct, it is clear that the Directive contemplates that the employment relationship, no less than the contract of employment, must give rise to rights and obligations on the transferor with rights for the employee to enforce the liability in respect of those obligations (see Art. 3(1) ). The European Court of Justice has held that it is a condition for the operation of the Directive that the employee of the transferor continues as an employee of the transferee, that the Directive will not apply if the relationship between the transferor and the person concerned is not that of employer and employee and that the Directive may be relied upon only by persons who are protected as employees under the law of the Member State concerned; if they are so protected, the Directive ensures that their rights arising from a contract of employment or an employment relationship are not diminished as a result of the transfer (see Foreningen af Arbejdsledere i Danmark v Danmols Inventar [1985] ECR 2639 especially at p. 2653 paras. 27 and 28). It is therefore for the English court to determine whether Mr. Askew was an employee of the Old Governing Body under English law.

Mr. Linden submitted that Mr. Askew was protected as an employee under English employment law by virtue of his contract of employment with the Council and that he also was in an employment relationship with the Old Governing Body; they were the transferors of the undertaking to the New Governing Body, and the Directive operated to ensure that Mr. Askew’s rights were not diminished as a result of the transfer. I cannot accept that submission. The fact that Mr. Askew was protected as an employee of the Council is irrelevant to the operation of the Directive unless the Council were the transferors, which plainly they were not. The question is whether under English law Mr. Askew was protected as an employee of the Old Governing Body by virtue of an employment relationship. I cannot see that he was. The only rights and obligations to which Mr. Linden points as arising from the relationship with the Old Governing Body are the rights and obligations arising from the employment contract. But those are rights and obligations of the Council and not of the Old Governing Body and it required the deeming provisions of the 1989 Order to treat the Old Governing Body as the employers for certain limited purposes. I do not overlook the fact that the governing body, not the LEA, are the persons designated by the 1989 Order to be the parties to proceedings brought by an employee of the LEA in an industrial tribunal and that by Art. 6(3) of the 1989 Order orders made by the tribunal for reinstatement or reengagement are excepted from the provision that orders are to have effect as if made against the LEA. But these are procedural and ancillary matters as distinct from the substantive right to employment which the Directive was designed to protect.

I turn next to TUPE. There was some discussion before us on the meaning of the words “or otherwise” in the definition of the term “employee”, on which Mr. Linden relies. Mr. Linden sought to derive assistance from what was said in the House of Lords in the debate on 10 December 1981 on TUPE. He argued that Lord Lyell, who opened the debate for the Government, appeared to accept that employment relationships were protected and were not restricted to contractual relationships. I am not persuaded that the conditions for the admission of such Parliamentary material which were laid down in Pepper v Hart [1993] AC 593 are satisfied, if only because Lord Lyell’s remarks do not seem to me to throw any light on what is in issue. He said (Hansard: HL Debates Vol. 425 col. 1496):

“These wider definitions of “employee” and the “contract of employment” are to embrace the wider concept of what appears in the directive as “employee relationships”.”

In the present case it is not in dispute that an employee relationship is covered as well as a contract of employment but what is in dispute is whether that must be a contractual relationship. Lord Lyell said nothing to elucidate that.

In my judgment it is clear that TUPE proceeds on the basis that there must be a contract. One gets that from the application of the eiusdem generis rule to “contract of service or apprenticeship or otherwise” in the definition of “employee”, from the definition of “contract of employment” as meaning any agreement between an employee and his employer determining the terms and conditions of his employment, and from Reg. 5 (1) which proceeds on the footing that there will be a contract of employment of a person employed by the transferor in the undertaking or part transferred. TUPE also proceeds , consistently with the Directive, on the footing that the employee is employed by the transferor and will become the employee of the transferee. Mr Askew, with no contract with the Old Governing Body, and never employed by that body and with no contract with and never employed by the New Governing Body, cannot avail himself of TUPE.

I conclude that the second Appeal Tribunal was right to hold that TUPE has no application to the circumstances of the present case, and the same can be said of the Directive.

It may be said that there is a surprising gap in the statutory provisions through which teachers like Mr. Askew may fall when, on a common sense view of a reorganisation of schools, two schools are merged to become a new school though in effect carrying on providing education to much the same persons as before. But as Mr. Oldham pointed out, there is a tension between two policies: the protection of teachers’ employment and the principle that the governing body of a school choose the staff of the school. It may well be that the gap has been left deliberately by successive governments of different political persuasions, so as to allow the latter policy to prevail. It would not have been difficult to extend the application of the 1989 Order to TUPE or to mirror the effect of TUPE in the 1988 Act, as was done by s. 75 in respect of schools becoming grant-maintained. It is not for the courts to fill that gap.

I will not comment on the further submissions of Mr. Oldham relating to points taken in the Respondent’s Notice but not determined by the Industrial Tribunal or either Appeal Tribunal. For the reasons which I have given I would dismiss this appeal.

LORD JUSTICE WARD: There is an attractive logic in the appellant’s case. As analysed by Mr Linden on his behalf, he lost before the first Employment Appeal Tribunal ( Kirkwood J. presiding) because it was there held that he had been made redundant because the Governors of the Middle School (the Old Governors), for whom he worked, had no more work for him even though the Governors of the new Primary School (the New Governors) did. On the other hand he lost before the second Employment Appeal Tribunal (His Honour Judge Peter Clark presiding) because there it was found that he did not work for the Old Governors but only for the Local Education Authority so that there could be no transfer of his work from the Old Governors to the New. Thus, submits Mr Linden, both decisions cannot be right: either the identity of his employer remained the same (in which case his employment continued), or it changed (in which case there was a transfer of the employment relationship from one person to another). Those submissions demand careful scrutiny.

It is common ground that the appellant’s contract of employment was made between him and the L.E.A. In 1993, after due and proper consultation including discussions with the Teachers’ Union, the L.E.A. took the decision pursuant to section 12 of the Education Act 1980 that it intended to cease to maintain the old First and Middle Schools. The consequence of that decision was that the schools ceased to be capable of operating at all. The closure date was fixed to be 31st August 1993. A new Primary School was established to open the following day. But this was no phoenix, for the new Primary School was quite different from any amalgamation of the old First and Middle Schools. It must be noted that the decision taken was to cease to maintain the old schools and to establish a new school, not a decision - which could also have been taken under section 12 - “to make any significant change in the character...of a County School.” The legislative powers were starkly restricted to “cease”, “establish”, and “change”: there is, therefore, no place for Mr Linden’s concepts of merger and amalgamation.

The decision to cease to maintain the old school having been taken it was the old Governing Body which had the responsibility for coping with its demise. The old Governing Body determined, pursuant to paragraph 8 of Schedule 3 to the Education Reform Act 1988, that the appellant, as a “person employed to work at the school”, should cease to work there with the required and inevitable result that the L.E.A. gave him notice terminating his contact of employment with the Authority. The new school did not formally exist at that moment of dismissal though a temporary Governing Body did exist to engage staff for that proposed new school. Their duties were, however, confined to setting up the new school, not to oversee the cessation of the old. Whilst they had powers pursuant to paragraph 2 of Schedule 3 to recommend applicants to L.E.A. for appointment as teachers at the new school, the temporary new Governing Body had no powers to deal with dismissal of staff at the old school. The decision to recommend the applicant for dismissal was for the Old Governors to take and for the L.E.A. to implement. The Employment Appeal Tribunal were in my judgment right to treat that as a dismissal for redundancy reasons which was fair.

Consequently I agree, for the further reasons given by Peter Gibson L.J., that the appeal against the decision of the first Employment Appeal Tribunal must fail.

The case argued before the Appeal Tribunal was that the appellant was protected by the Transfer of Undertakings (Protection of Employment ) Regulations 1981 (“TUPE”). Before us, another case was also urged, namely that the Acquired Rights Directive (77/187/EEC) (“the Directive”) had direct effect and that gave the appellant protection. Since the courts of the United Kingdom are under a duty to give a purposive construction to TUPE in a manner which would accord with the decisions of the European Court of Justice on the Directive - see Litster -v- Forth Dry Dock Co Ltd [1990] 1 AC 546 - it is convenient to take both together.

The preamble to the Directive gives the clue to its purpose. Recognising that there were “changes in the structure of undertakings, through transfers of undertakings, businesses or parts of businesses to other employers as a result of legal transfers or mergers,” the purpose was expressed to be:-

"to provide for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded."

By Article 1(1), the Directive applied to:-

" the transfer of an undertaking, business or part of a business to another employer as a result of legal transfer or merger.” (Emphasis added.)

Article 2 set out the definitions including:-

"(a) “Transferor” means any natural or legal person who, by reason of a transfer within the meaning of Article 1(1) ceases to be the employer in respect of the undertaking business or part of the business;

(b) “Transferee” means any natural or legal person who, by reason of a transfer within the meaning of Article 1(1), becomes the employer in respect of the undertaking business or part of the business..."

The employees’ rights were protected by Article 3(1) in these terms:-

"The transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer within the meaning of Article 1(1) shall, by reason of such transfer, be transferred to the transferee."

TUPE is intended to give effect to the Directive. Regulation 3, dealing with “a relevant transfer” provides:-

"(1) Subject to the provisions of these Regulations, these Regulations apply to a transfer from one person to another of an undertaking situated ...in the United Kingdom...

(2) Subject as aforesaid, these Regulations so apply whether the transfer is effected by sale or by some other disposition or by operation of law."

The effect of a relevant transfer is prescribed by Regulation 5 as follows:-

"(1) ...a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred but any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee."

The protection to employees is given by Regulation 8 as follows:-

"(1) Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee shall be treated for purposes of Part V of the 1978 Act...(unfair dismissal) as unfairly dismissed if the transfer or reason connected with it is the reason or principal reason for his dismissal.

(2) Where an economic technical or organisational reason entailing changes in the work force of either the transferor or the transferee before or after a relevant transfer is the reason or principle reason for dismissing an employee -

(a) paragraph (1) above shall not apply to his dismissal..."

There are definitions in Regulation 2 as follows:-

"“contract of Employment” means any agreement between an employee and his employer determining the terms and conditions of his employment;

“employee” means any individual who works for another person whether under a contract of service or apprenticeship or otherwise but does not include anyone who provides services under a contract for services and references to a person’s employer shall be construed accordingly;

“relevant transfer” means a transfer to which these Regulations apply and “transferor” and “transferee” shall be construed accordingly;

“undertaking” includes any trade or business"

The Employment Appeal Tribunal held that the Old School was an undertaking for these purposes and the cross-appeal against that finding has been abandoned. I did not, however, understand Mr Oldham to abandon his argument that there has been no transfer. Since the whole application of the regulations depends upon whether there was or was not, I consider that first.

One of the earliest decisions from Luxembourg was Spijkers -v- Benedik 1986 ECR 1119 where the court gave this guidance:-

"11... It is clear from the scheme of Directive No 77/187 and from the terms of Article 1(1) thereof that the Directive is intended to ensure the continuity of employment relationships existing within a business, irrespective of any change of ownership. It follows that 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.

...

15...In order to establish whether or not such a transfer has taken place in a case such as that before the national court, it is necessary to consider whether, having regard to all the facts characterising the transaction, the business was disposed of as a going concern, as would be indicated inter alia by the fact that its operation was actually continuing or resumed by the new employer, with the same or similar activities."

I note that “employment relationships” seems to be used in a wide umbrella-like way and I note also that the cardinal feature of any transfer lies in the fact that the business operation is to be continued or resumed by a new employer. Both the adjective “new” and the description “employer” are significant.

Another much quoted case is Dr Sophie Redmond Stichting -v- Bartol 1992 E.C.R. 1-3189. There the court held:-

"11...It (the court) has therefore given that concept (the expression “legal transfer”) a sufficiently flexible interpretation in keeping with the objective of the Directive, which is to safeguard employees in the event of a transfer of their undertaking and has held that the Directive is applicable whenever, in the context of contractual relations, there is a change in the natural or legal person who is responsible for carrying on the business and who incurs the obligations of an employer towards employees of the undertaking."

One notes again that the essence is that there should be a change and this case emphasises that the change is to be both in the person who is responsible for carrying on the business and also in the person who incurs the obligations of an employer towards employees. So there must be different owners or operators of the business and there must be different employers of the staff.

That was applied in Hidalgo -v- Ziemann 1999 I.R.L.R. 136 where the court added that:-

"Whilst the absence of any contractual link between the transferor and the transferee... may be evidence that no transfer within the meaning of the Directive has occurred, it is certainly not conclusive."

Applying these principles to the facts before us, what is required in order that any protection be afforded to employees whether under the Directive or under TUPE is that there be a transfer of the undertaking “to another employer”, per the Directive, or “from one person to another”, per TUPE. The first pointer away from such a transfer (but it is no more than that) is that there is nothing in the nature of a contract or anything “in the context of contractual relations” suggesting a ”legal transfer or merger” which usually forms the cornerstone of the transfer. Although that may not necessarily be fatal, the position here seems closer to that which prevailed in Henke -v- Schierke 1996 E.C.R. 1-4989 where the court held:-

"14. Consequently, the reorganisation of structures of the public administration or the transfer of administrative functions between public administrative authorities does not constitute a “transfer of an undertaking” within the meaning of the Directive."

Turning to TUPE, and to Regulation 3(2) there is no transfer “effected by sale.” Nor is it easy to find any other “disposition” if, as Lord Hoffmann said in Newlon Housing Trust -v- Alsulaimen [1997] 1 A.C. 313, 316:-

"“Disposition” is a familiar enough word in the law of property and ordinarily means an act by which someone ceases to be the owner of that property in law or in equity."

As I understand it, the L.E.A. owned the property of the Middle School and the L.E.A. continued to own it after it had established the new school. The Governing Body do not own the assets. I see some force in the submission that that the Governors may be “responsible for carrying on the business”, in the European sense, because pursuant to section 16 of the Education (No. 2) Act 1986 the conduct of the school is under the direction of the Governing Body and they manage the school’s budget pursuant to section 36 of the Education Reform Act 1988. Since the essence of the Directive and TUPE is a new proprietor, rather than a new manager, I doubt whether that is enough by itself for there is still the requirement for a new employer to which I will return. Finally, the reorganisation does not seem to have effected a transfer of the undertaking “by operation of law” within the meaning of Regulation 3(2) because under section 12 of the Education Act 1980 it is the L.E.A. which ceased to maintain the old school and the L.E.A. which established the new. What happened is no different from any commercial reorganisation of resources, human and material, perhaps with the introduction of some new management team, all taking place within the same business.

The fatal flaw in the appellant’s argument, in my judgment, is that he cannot establish the essential requirement of a change of employer. The Directive is explicit: it requires the transfer of the undertaking “to another employer”. There is no definition of “employer”. We have seen in S pijkers that whether or not there is a transfer is a matter for the national court. So it is in the case of an employee: see Foreningen -v- Danmols 1985 ECR 2639 where it was held:-

"28...the term “employee” within the meaning of Directive No 77/187 must be interpreted as covering any person who, in the Member State concerned, is protected as an employee under National Employment Law. It is for the national court to establish whether that is the case in this instance."

I therefore proceed upon a basis that it for us to determine whether there has been a change of employer. In my judgment there has not. It is common ground that the only contract of employment was with the L.E.A.. The governing body are not employers of the staff in the schools even when the staff work only at their schools. Mr Askew did not work for the Old Governors as Mr Linden postulates in his opening submission of inconsistency between the two E.A. T . decisions and this error may undermine the coherence of that superficially attractive argument. The reality is that the L.E.A. would be the employer of the employees of the new school just as it was of the staff of the old school. Given the way our educational system is organised with contracts of employment being made between teacher and L.E.A. with the school governors having no more than an advisory role, there simply is no way in which the appellant can show that there was a transfer of anything to a new employer. In my judgment the appellant fails to establish that there was a transfer within the meaning of Article 1(1) of the Directive.

When one turns to TUPE, the position is made clear in Regulation 5. Assuming for the purpose of the argument that there was a transfer, then the scheme of the regulations is that the transfer does not operate so as to terminate the contract of employment of the person employed by the transferor and the contract of employment has effect as if originally made with the transferee. The regulation envisages a contract of employment with the transferor being imposed upon the transferee, a different person. There must be a different employer not, as here, the same employer. The Regulations deal only with the effect of the transfer on a contract of employment , not on anything else and so there cannot be any novation of a non-contractual employment relationship, even if there is such a thing.

The appellant’s next submission is that Regulation 8 provides his remedy because, as an employee of the transferor, he is to be treated as unfairly dismissed. He identifies the Old Governors as that transferor. This submission is also flawed. Firstly, and crucially, he must for Regulation 8 purposes be an employee of the transferor who, under the definition in Regulation 2(1), is the person making the transfer to which the Regulations apply. He needs to say he is the employee of the Old Governors but they transferred nothing for they had no undertaking trade or business to transfer. If anyone was transferring anything, it was the L.E.A.. Secondly, he depends on the definition of employee in Regulation 2(1). He submits that although his contract of service is with the L.E.A., he “otherwise” also “works for” the Old Governors in that, as he works at the school which they govern, he must to some extent work for them. This is a wholly vague notion running at odds with the general rule that the right not to be unfairly dismissed is the right of an employee, i.e. one who has entered into or works under a contract of employment: see section 153 of the Employment Protection Act 1978. Moreover that construction unnaturally strains the language. It forces the adverb “otherwise” to qualify the words “works for” rather than the word “contract”. On his construction an employee means - with the words in parenthesis substituted for the word “otherwise”- an individual who works for a person under a contract of service or apprenticeship or (who works for a person in some other way). The more natural meaning is an individual who works for a person under a contract of service or apprenticeship or (under some other contract). So I reject that argument.

Finally there is the argument based on the direct effect of Article 3 of the Directive safeguarding the “employees’ rights” by providing that the transferor’s rights and obligations arising from a contract of employment or from an employment relationship shall, by reason of the transfer, be transferred to the transferee. Since the protection arises by reason of the transfer, some transfer is an essential prerequisite to the operation of this Article and in my judgment, for reasons already given, there is no such transfer in this case. Nevertheless I must deal with the submission that the Old Governors had rights and obligations arising from an employment relationship with Mr Askew.

I have already drawn attention to the broad way in which the phrase is used in the language of the European Court. The only other case shown to us where the concept was discussed was Botzen -v- Rotterdamsche Droogdok Maatschappij BV 1985 E.C.R. 519. There the issue was whether some of the employees in an administrative department of a bankrupt engineering company were entitled to protection in circumstances where their services were not required by the acquiring company which took over other sections of the company and the staff employed there. The court held:-

"An employment relationship is essentially characterised by the link existing between the employee and the part of the undertaking or business to which he is assigned to carry out his duties. In order to decide whether the rights and obligations under an employment relationship are transferred under Directive No 77/187 by reason of a transfer within the meaning of Article 1(1) thereof, it therefore sufficient to establish to which part of the undertaking or business the employee was assigned."

This does not give much help to the problem at hand. It seems to me that an employment relationship between Mr Askew and the Old Governors, if it existed at all, could only arise by operation of the Education (Modification of Enactments Relating to Employment) Order 1989. That refers to “employment powers” which are defined as references to the powers of appointment, suspension, discipline and dismissal of staff conferred by or under sections 44, 45, 46, 148 and 149 of, and Schedule 3 and paragraph 4 of Schedule 4 to the Education Reform Act 1988. Section 44 (which seems to be the most relevant section) itself refers to Schedule 3. Schedule 3 does not create any obligations between the Governing Body and the Staff but merely gives the Governing Body the power to recommend a person for appointment to a post in the school with the consequent effect that the Local Education Authority must appoint that person. The Order also provides that references in various enactments, including relevantly for this purpose, Part V of the Employment Protection (Consolidation) Act 1978, are to have effect as if any reference to an employer included a reference to the Governing Body as if the Governing Body had at all material times been such an employer. Paragraph 4 of the Order deals specifically with dismissal and provides that the Employment Protection (Consolidation) Act 1978 shall have effect in relation to any dismissal as if the Governing Body had dismissed the employee, their reasons being treated as the reasons for the dismissal. Those are deeming provisions having procedural effect only. The need to join the governors in any proceedings before the Industrial Tribunal is another procedural requirement. Any finding of the Tribunal may give rise to obligations but the arise from the order, not from an employment relationship as required by the Directive. For my part I cannot see that the Modification Order creates rights and obligations capable of being transferred. Indeed we have not been given any example of any right or obligation which a teacher could enforce against the governors or vice versa. The appellant cannot avail of Article 3(1).

For these reasons, I would dismiss the appeal. If in the result it is illogical that teachers should fall between two stools, then Parliament must redress their hardship.

LORD JUSTICE CHADWICK: I agree that the conclusions reached by the Employment Appeal Tribunal on the questions before them were correct. But, on the new question raised in the course of this appeal - namely, whether the appellant was entitled to the relief which he seeks by the direct application of the E C Council Directive of 14 February 1977 (“the acquired rights directive”) - I have reached a different conclusion from that of the other members of the court. It is appropriate, therefore, that I should explain my reasons.

There is nothing that I wish to add to the reasons given by Lord Justice Peter Gibson for his conclusion that the decision reached by the Employment Appeal Tribunal on 27 January 1997 is unassailable. The necessary effect of Articles 3 and 4 of the Education (Modification of Enactments Relating to Employment) Order 1989, read in conjunction with section 44(3) of, and paragraph 8(1) in schedule 3 to, the Education Reform Act 1988, is that - subject to the Transfer of Undertakings (Protection of Employment) Regulations 1981 (“TUPE”) and the acquired rights directive - the question whether the appellant was unfairly dismissed for the purposes of Part V of the Employment Protection (Consolidation) Act 1978 must be determined on the hypothesis that he was dismissed by the governing body of Clifton Middle School (“the old governing body”) and that the reason or principal reason for which the old governing body did dismiss him was the reason or principal reason for which they made their determination under paragraph 8(1) in schedule 3 to the 1988 Act. On that hypothesis it must be accepted that the appellant was dismissed for a reason falling within section 57(2) of the 1978 Act - namely, that he was redundant; and it was accepted both before the Employment Appeal Tribunal and before this Court that, on the basis of redundancy, his case had been dealt fairly by the old governing body.

I turn, therefore, to the TUPE regulations, the subject of the decision reached by the Employment Appeal on 16 June 1997. Regulation 8(1) is in these terms:

Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee shall be treated for the purposes of Part V of the [Employment Protection (Consolidation) Act 1978] . . . (unfair dismissal) as unfairly dismissed if the transfer or a reason connected with it is the reason or principal reason for his dismissal.

Where regulation 8(1) applies, with the effect that a dismissal which has (in fact) taken place before a relevant transfer (but for a reason connected with it) must be treated as unfair, the employee can rely also on regulation 5 - see Litster v Forth Dry Dock & Engineering Co Ltd [1990] 1 AC 546, at page 577. Regulation 5(1) is in these terms:

. . . a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred but any such contract which would otherwise have been terminated by the transfer shall have effect as if originally made between the person so employed and the transferee.

The effect is that, in such a case, the employee can seek remedies for unfair dismissal under Part V of the 1978 Act against the transferee.

There are two short, and related, points of construction. First, whether the reorganisation of the Borough’s schools - by the closure of Clifton Middle School and the opening of Clifton Primary School with effect from 1 September 1993 - is a “relevant transfer”; and, second, whether the appellant can be treated as “an employee of the transferor” in that context.

A “relevant transfer” for the purposes of regulations 5(1) and 8(1) is a transfer to which the TUPE regulations apply, and “transferor” and “transferee” are to be construed accordingly - see regulation 2. The transfers to which the regulations apply are described in regulation 3. So far as material, those are transfers “from one person to another of an undertaking” whether “the transfer is effected by sale or by some other disposition or by operation of law” - see regulations 3(1) and (2).

It was accepted by the Employment Appeal Tribunal that the functions formerly carried at the Clifton Middle School under the direction of the old governing body were “an undertaking” on the transfer of which the TUPE regulations were capable of applying. That proposition was challenged by respondents’ notice; but the challenge was not pursued at the hearing of the appeal. It was contended by the appellant that the re-organisation of the Borough’s schools had the effect that there was a relevant transfer of that undertaking by the old governing body to the governing body of Clifton Primary School (“the new governing body”). The Employment Appeal Tribunal took the view that the validity of that contention turned on the question whether the appellant could be treated as the employee of the old governing body for the purposes of the TUPE regulations. There could be no relevant transfer unless the transferor (in this context, the old governing body) was, at the relevant time, also the employer. I do not understand that proposition to be challenged by the appellant. His contention is that, on a proper construction of the TUPE regulations, read in conjunction with the acquired rights directive, the old governing body is to be treated as his employer at the time when he was dismissed; that the reason for his dismissal was the reorganisation which was to be effected by the transfer; and that, accordingly, the dismissal must be treated as unfair - see regulation 8(1) - with the consequence that he is entitled to rely on regulation 5(1) as against the new governing body.

That leads to the second question; whether the old governing body is to be treated as having been the appellant’s employer at the time when he was dismissed. That turns on the definition of “employee” in regulation 2(1). “Employee” means any individual who works for another person under a contract of service or apprenticeship “or otherwise”, but does not include anyone who provides services under a contract for services. The short point of construction is whether the effect of the words “or otherwise” is that A can be said to be the employee of B notwithstanding that there is no contract between them; in particular, whether A can be said to be the employee of B in circumstances where A has a contract of service with C under which C requires him to provide services to B. If that question fell to be decided in accordance with the principles of construction applicable to domestic legislation, and without reference to the obligations of the United Kingdom under the EC Treaty, I should have no doubt that it should be answered in the negative. In such a case it is C, and not B, who is the employer. The position might be otherwise if it could be said that C was acting on behalf of, or as agent for, B - see the observations of Mr Justice Morrison when giving the decision of the Employment Appeal Tribunal in Duncan Web Offset (Maidstone) Ltd v Cooper [1995] IRLR 633, 635 - but that is not this case.

But the question does not fall to be decided solely in accordance with the principles of construction applicable to domestic legislation. The TUPE regulations were made for express purpose of giving effect to the acquired rights directive and must be construed accordingly - see Litster v Forth Dry Dock & Engineering Co Ltd [1990] 1 AC 547, at page 559.

The acquired rights directive was adopted for the purpose, amongst others, of providing “for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded”. To that end the directive applies “to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger” - see Article 1(1). Articles 3(1) and 4(1) are in these terms, so far as material:

3(1) The transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer within the meaning of Article 1(1) shall, by reason of such transfer be transferred to the transferee. [emphasis added].

4(1) The transfer of an undertaking, business or part of a business shall not of itself constitute grounds for dismissal by the transferor or the transferee. . . .

The directive contains no definition of “employer”, “employee”, “contract of employment” or “employment relationship”; but it does contain definitions of “transferor” and “transferee” -see Article 2:

(a) “transferor” means any natural or legal person who, by reason of a transfer within the meaning of Article 1(1), ceases to be the employer in respect of the undertaking, business or part of the business;

(b) “transferee” means any natural or legal person who, by reason of a transfer within the meaning of Article 1(1), becomes the employer in respect of the undertaking, business or part of the business;

The only assistance that can be obtained from the acquired rights directive, as it seems to me, is that it applies only on the transfer of an undertaking, business or part of a business from one employer to another employer; and that one person, say “X”, is the employer of another person, say “Y”, where there exists between X and Y a contract of employment or “an employment relationship”. The question whether or not a contract of employment or an employment relationship does exist between X and Y in any particular case is left to the national law - see Knud Wendelboe v L J Music ApS (Case 19/83) [1985] 1 ECR 457, at page 467 (paragraph 16 in the judgment of the Court of Justice), Foreningen af Arbejdsledere i Danmark v A/S Danmois Inventar (Case 105/84) [1985] ECR 2639, at page 2653 (paragraph 28), and P Bork International A/S v Foreningen af Arbejdsledere i Danmark (Case 101/87) [1989] IRLR 41, at page 44 (paragraph 17). It is for the national court to decide whether or not, at the date of the transfer, the employee in question was linked to the undertaking by virtue of a contract of employment or an employment relationship.

I am not persuaded that the provisions of the acquired rights directive require - or enable - the court to give to the words “or otherwise” in TUPE regulation 2(1) a meaning which extends the definition of “employee” to an individual (X) who works for another person (Y) under an arrangement which, as between X and Y, is non-contractual. There is, plainly, a need when construing the TUPE regulations to give some effect to the obvious intention that the protection afforded by the acquired rights directive should extend not only to an employer’s obligations arising from “a contract of employment” but also to obligations arising from “an employment relationship”; in whatever sense those expressions are used in the directive. In the context of the acquired rights directive “an employment relationship” must be a reference to a relationship under some arrangement which is not within the phrase “contract of employment”. But that does not lead to the conclusion that that other arrangement must be non-contractual. It leads only to the conclusion that, if contractual, that other arrangement is not, or may not be, regarded by the national law as a contract of employment.

It must be kept in mind that the acquired rights directive predates the TUPE regulations. It cannot be permissible to read into the acquired rights directive the extended meaning which regulation 2(1) of the TUPE regulations gives to the phrase “contract of employment”. The more usual meaning of the phrase, as can be seen from its use in United Kingdom employment legislation at the time when the acquired rights directive was adopted, is “a contract of service or apprenticeship” - see section 153(1) of the Employment Protection (Consolidation) Act 1978. But the phrase can be given a more extensive meaning - see section 82(1) of the Sex Discrimination Act 1975. The correct approach to the use of that phrase in the acquired rights directive, as it seems to me, is to attribute to those who framed that directive an appreciation that “contract of employment” might have a particular or limited meaning under national law (including, but not limited to, the domestic law of the United Kingdom); and an intention that the directive should extend to obligations (including statutory obligations independent of contract) which arose out of an employment relationship which was not be founded on a “contract of employment” within that particular or limited meaning. But the questions “what obligations” and “what employment relationship” are left to be determined by the national law.

If the matter is approached in that way, it can be seen how effect is given to the intention behind the acquired rights directive by the definitions of “employee” and “contract of employment” which have been adopted in the TUPE regulations. “Employee” includes a person who is not employed under a contract of employment in the sense that that phrase is used in the 1978 Act; the definition in regulation 2(1) is at least as wide as that adopted by the legislature for the purposes of the Sex Discrimination Act 1975. “Contract of employment” is given an extended meaning, so as to include any agreement between an employee and his employer determining the terms and conditions of his employment. That is, clearly, capable of including any agreement under which there is “an employment relationship” within the meaning of the acquired rights directive. So “contract of employment” is defined in the TUPE regulations to include contracts of service and apprenticeship - that is to say, to include contracts which would be “contracts of employment” in the Employment Protection Act sense - and to include other agreements which record or evidence “an employment relationship”. But “contract of employment” as defined in the TUPE regulations does not include an employment relationship in which there is no agreement between the employee and his employer which determines the terms and conditions of the employment; nor, in my view, does “contract of employment” as so defined extend to a non-contractual agreement. The reason is that the employment relationships to which the TUPE regulations were intended to apply must be relationships which, at the time when the regulations were made, were capable of being protected by those regulations. In particular, the relationships to which the TUPE regulations were intended to apply must be relationships which, at the time when the regulations were made, provided some basis for the application of regulation 5(1) or regulation 6; or gave rise to rights capable of being protected by Part V of the Employment Protection (Consolidation ) Act 1978 so as to provide a foundation for the application of regulation 8(1).

I am satisfied that the need to find one or both of those characteristics in the employment relationships to which the TUPE regulations were intended to apply leads, necessarily, to the conclusion that the relationship must be based on a contract between employee and employer. I am not persuaded that regulations 5 or 6 were intended to apply to non-contractual agreements. The rights protected by Part V of the 1978 Act are rights under a contract of employment in the sense defined by section 153 of that Act. It is true that, by virtue of Article 3 of the Education (Modification of Enactments Relating to Employment) Order 1989, Part V of the 1978 Act now has effect as if the governing body of a maintained county school were the employer - notwithstanding the absence of any contract between the governing body and the employee - but, in the absence of some provision to that effect in the 1989 Order, Article 3 cannot, as it seems to me, alter the meaning of “employee”, or “contract of employment”, in the TUPE regulations. The 1989 Order is, to my mind, of relevance in considering the direct application of the acquired rights directive at the time of the reorganisation of the schools in 1993. But the TUPE regulations must be construed on the basis of the law as it was in 1981; not on the basis of the law as it became in 1989.

It follows that, despite the attractive arguments put forward by Mr Linden on behalf of the appellant, I am not persuaded that the Employment Appeal Tribunal were wrong to reach the conclusion that the appellant can derive no assistance from the TUPE regulations. But for the further point, raised for the first time in this Court, that would be sufficient to dispose of these appeals.

The further point, as developed in argument, is that the appellant does not need to rely on the TUPE regulations; he can rely on the provisions of the acquired rights directive. The respondents accept, for the purposes of this appeal, that the provisions of the directive are directly enforceable against them.

The provision relied upon by the appellant is that in Article 3(1). It is convenient to set out its terms again:

The transferor’s rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer within the meaning of Article 1(1) shall, by reason of such transfer, be transferred to the transferee.

The first hurdle which the appellant must surmount before any assistance can be obtained from that provision is that, on the facts as found below, his contract of employment was determined on 31 August 1993; which was the day before the day (1 September 1993) on which any transfer of the undertaking formerly carried on by the old governing body could be said to have taken place. On that basis, there was no contract of employment existing on the date of transfer. But the appellant relies on Article 4(1):

The transfer of an undertaking, business or part of a business shall not in itself constitute grounds for dismissal by the transferor or the transferee. This provision shall not stand in the way of dismissals which take place for economic, technical or organizational reasons entailing changes in the work force.

There was no finding below on the question whether the dismissal of the appellant was for economic or organisational reasons. The point was not raised in the Industrial Tribunal; and, in the light of their conclusion that the TUPE regulations had no application at all, it was unnecessary for the Employment Appeal Tribunal to make any finding under regulation 8(2). For my part, on the facts which were found below, I find it difficult to see how it could be said that the decision to dismiss the appellant was not taken for economic or organisational reasons; but that is not a matter which has been developed before us and I express no concluded view.

The appellant can gain no assistance from Article 3(1) of the acquired rights directive unless he can show that the old governing body was subject to obligations arising from a contract of employment or from an employment relationship which were capable of being transferred by that Article. For the reasons already explained the old governing body was subject to no obligations arising from any contract of employment under which it was the employer. But it is necessary to go on to consider whether, for the purposes of the acquired rights directive, the old governing body was subject to obligations arising from an employment relationship. That is a question to be determined by national law at the time when it arises. In this case it is a question to be determined, as it seems to me, by considering the effect of articles 3, 4 and 6 of the 1989 Order on the relevant provisions in the 1978 Act.

Section 54(1), in Part V of the 1978 Act, is in these terms:

In every employment to which this section applies every employee shall have the right not to be unfairly dismissed by his employer.

“Employment”, for that purpose, is defined by section 153 of the Act. It means employment under a contract of employment. A “contract of employment”, in that context, has the meaning to which I have already referred; namely, a contract of service or apprenticeship. But article 3(1) of the 1989 Order requires that section 54(1) of the 1978 Act shall have effect as if:

(a) any reference (however expressed) to an employer, a person by whom employment is offered, or a principal included a reference to the governing body acting in the exercise of their employment powers and as if that governing body had at all times been such an employer, person or principal;

(b) in relation to the exercise of the governing body’s employment powers, employment by the local education authority at a school or institution were employment by the governing body of that school or institution;

(c) references to employees were references to employees at the school or institution in question;

(d) references to dismissal by an employer included references to dismissal by the local education authority following notification of a determination by a governing body under paragraph 8(1) of Schedule 3 to . . . [the Education Reform Act 1988]; . . .

If section 54(1) of the 1978 Act is to have effect in the way which article 3(1) of the 1989 Order requires, then it must be read as if the “employer” is the old governing body; as if “employment” by the local education authority at the school is employment by the old governing body; and as if the “employee” is an employee at the school. So read, the section has the effect that employees at the school are treated as employees of the governing body and have the right not to be unfairly dismissed by the governing body. If the section confers a right on the employees it must be taken to impose a correlative obligation on the governing body, as the deemed employer. The obligation is an obligation not to dismiss unfairly. The remedies for breach of that obligation include orders for reinstatement or re-engagement - see section 69 of the 1978 Act. Those orders, if made, are made against the governing body, not against the local authority - see article 6 of the 1989 Order

With those matters in mind, I find it impossible to hold that the old governing body was not subject to obligations arising from an employment relationship with the appellant within the meaning to be given by national law to that expression in Article 3(1) of the acquired rights directive. It follows that, subject to the application of Article 4(1) of the directive - which, as I have indicated, requires a finding on the question whether the dismissal of the appellant on 31 August 1993 was for economic, technical or organisational reasons - I would hold that the obligations of the old governing body in relation to the appellant were transferred to the new governing body.

For the reasons which I have sought to explain, I would have allowed the appeal and remitted the matter to the employment tribunal to make the necessary findings of fact.

Order: Appeal dismissed with costs. Leave to appeal was also refused