Appeal No. UKEAT/0441/10/JOJ
EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
At
the Tribunal
On
6 April 2011
Before
HIS HONOUR JUDGE
PETER CLARK
MS V BRANNEY
MR P GAMMON
MBE
I LAB
FACILITIES LTD APPELLANT
MISS L
METCALFE & OTHERS RESPONDENTS
Transcript of Proceedings
JUDGMENT
SUMMARY
TRANSFER OF UNDERTAKINGS - Transfer
PHR – TUPE - whether relevant transfer – no material
findings of fact by Employment Tribunal to support findings of relevant
transfer under reg 3 (1) (a). Case remitted to fresh Employment Tribunal upon
the appeal being allowed.
HIS HONOUR JUDGE PETER CLARK
Introduction
1.
The TUPE question which arises in this appeal is whether the Claimants
before the London Central Employment Tribunal, Ms Metcalfe and nine others,
were employed in part of the undertaking of a company, I Lab UK Ltd (“UK”), now
in liquidation, which was transferred to the Appellant company, I Lab
Facilities Ltd (“Facilities”), such that a relevant transfer took place within
the meaning of regulation 3(1)(a) of the 2006 regulations. An Employment
Tribunal chaired by Employment Judge Glennie found by its judgment with
extended reasons dated 28 June 2010 that a relevant transfer had taken place.
Against that judgment, reached at a pre-hearing review, Facilities now appeals.
Background
2.
We are concerned with two separate economic entities which existed
certainly up until the effective date of termination of the Claimants’
contracts of employment on 11 July 2009. Post-production work and rushes work
in the television industry. The distinction between the two types of operation
is conveniently summarised by the Tribunal at paragraph 26 of their reasons in
this way:
“Post-production work… involved editing and manipulating filmed
footage after filming had finished and producing the complete presentable
feature. This work is to be contrasted with ‘rushes’ work, which involves
taking the reels of film available at the end of a day’s shooting, transferring
that film onto a videotape via a telecine machine, and then adding the sound in
synchronisation with the images. This is usually done overnight with a view to
being produced to the director before beginning the next day’s shooting of the
film. As their name implies, rushes are a hurriedly-produced product intended
for ad hoc use and are not of the quality of a final post-production item.”
3.
The corporate history of these two strands of the business which
ultimately came together under the UK umbrella were as follows. The Claimants
were engaged in post-production work, initially with a company called M2 Ltd.
M2 went into administration on 28 April 2008. Thereafter, the Claimants’
employment was transferred first to Ticketlamp Ltd and later in about June 2008
to RKT Post-Production Ltd. RKT operated from premises in Frith Street.
Meanwhile, UK operated with different staff in the rushes business from
premises in Poland Street.
4.
In April 2009 what is described as a merger took place between UK and RKT. From that time, the Claimants’ employer was UK as a result of the transfer of
their employment from RKT to UK. Unfortunately, the merger failed. By June
2009, the merged companies were in serious financial difficulties. On 12 June
the Claimants were warned that redundancies were in contemplation by the
general manager of the now-merged companies, Ms Talbot Clark. On 24 June each Claimant
was given a letter signed by Mr John Tadros, there describing himself as
general manager and serving notice of termination of their employment to take
effect on 11 July.
5.
UK’s liquidator was appointed on 30 July 2009 and on 11 August
Facilities, which had been incorporated on 18 February 2009, purchased from the
liquidator UK’s plant and machinery for £1,100 and goodwill, the name and
client data for £3,900, with a rider to that agreement that the goodwill did
not include anything arising from post-production work (reasons, paragraph 40).
6.
Mr Tadros was a significant player in this story. He became involved in
M2 Ltd in 2002 when he invested money in that company. The Tribunal were not
much impressed with his evidence, which they found to be seriously lacking in
credibility for the reasons which they give at paragraph 19. He was a director
of Facilities and, the Tribunal found, the central decision-maker when it came
to the Claimants’ redundancy at UK, he having signed the redundancy dismissal
letters as general manager.
The Tribunal decision
7.
This was a PHR held to determine six preliminary issues identified at
paragraph 3 of the reasons. Those six questions were each answered in the Tribunal’s
judgment. Essentially, for present purposes, the Tribunal found that from 1
June 2008 until April 2009 the Claimants were employed by RKT and from April
2009 to 11 July 2009 by UK following a relevant transfer. That sequence of
events is undisputed.
8.
The issue in the appeal arises from the Tribunal’s further finding
(judgment, paragraph 2.3) that on 11 July 2009 the Claimants were dismissed for
a reason falling within regulation 7(1) of TUPE with the result that their
employment was subsequently transferred from UK to Facilities following a
relevant transfer. Each Claimant was part of that transfer. Their dismissals
were transfer-related within the meaning of regulation 7(1). A ruling was also
given on the period of continuous employment for each individual Claimant.
9.
In arriving at those conclusions the tribunal directed themselves as to
the applicable law at paragraphs 5 to 11. Following a brief reference to
regulation 3(1)(a), the Tribunal appear to have concentrated on regulations 4(1)
and 7(1) and the learning to be derived from the opinions in the House of Lords
in Litster v Forth Dry Dock & Engineering Co Limited (in
receivership) [1989] IRLR 161 and the Court of Appeal decision in Dynamex
Friction Limited & Ors v Amicus & Ors [2008] IRLR 515.
10.
At paragraphs 44 to 46, the Tribunal considered the rival contentions of
the parties as to what was to happen to the post-production work in which the Claimants
were engaged following the demise of UK. It was the Respondent’s case that
Facilities would take over only the rushes work performed by UK, not the
post-production work formally done by M2 Ltd and RKT (subsequently taken over
by UK). However, the Tribunal concluded (paragraph 45) that the intention
primarily in the mind of Mr Tadros was that as much as possible of the
pre-existing business should be taken over by Facilities and that would include
the post-production work. They then give reasons for their finding. As to Mr
Tadros’ and through him Facilities’ intentions so far as post-production work
was concerned, it was his intention to continue that part of the business of UK if possible. The purpose or intention behind dismissing the Claimants was to attempt to
create a situation whereby post-production work could be taken over by
Facilities, leaving behind employees who were not required without any
liability to pay them redundancy payments (paragraph 46). The effect of the Tribunal’s
decision, they said, was to thwart that ambition.
11.
On the transfer question, the Tribunal expressed their conclusion at
paragraph 51 in this way:
“The Tribunal therefore concluded that there were transfers of
an undertaking from M2 Ltd to RKT Post-Production Ltd and then on to I Lab (UK)
Ltd affecting the Claimants. The economic entity was the business of M2 Ltd
and of RKT Post-Production Ltd, and subsequently the part of the business of I
Lab UK Ltd, that carried out post-production work.”
The appeal
12.
We return to the real question in this appeal mentioned at the outset of
our judgment. With characteristic economy Mr Cheetham submits that there are
no findings of fact by the Tribunal which support the finding that a relevant
transfer of the post-production part of UK’s business in which these Claimants
were employed (the relevant economic entity) took place within the meaning of
regulation 3(1)(a), which provides:
“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 ...”
13.
Specifically, he submits, there is no finding that the pre-transfer
economic entity retained its identity post-putative transfer. Indeed, there is
no finding as to the date of transfer. Was it 11 July when these Claimants
were dismissed or 11 August when Facilities reached agreement with the
liquidator of UK or indeed some other date?
14.
In short, Mr Tadros’ intentions for Facilities to take on
post-production work, although relevant to the separate question as to whether
if there was a relevant transfer the dismissals were transfer-related for the
purposes of regulation 7(1) must itself be predicated on the proposition that
there is a relevant transfer in the first place. The absence of any findings
of fact to support a finding that there was a relevant transfer, he submits, is
fatal to the Tribunal’s conclusions in their PHR judgment.
15.
In response Mr Goldman realistically acknowledges that there are no
findings of fact by the Tribunal which address the transfer questions helpfully
formulated by Lindsay J (President) in Cheesman & Ors v R Brewer
Contracts Limited [2001] IRLR 144. However, he invites us to take a
purposive approach as did the House of Lords in Litster and hold
that it is enough that the Tribunal found an intention on the part of Mr Tadros,
as the guiding hand behind both UK and Facilities, for the latter to take over
as much of the former’s post-production work as was possible.
16.
We are unable to accept that submission. In Litster there
was a relevant transfer and the House of Lords’ approach started from that
base. In the present case we can discern no factual findings by the Tribunal
which support the proposition that the earlier economic entity in which the Claimants
were engaged retained its identity following the putative transfer. It follows
that this appeal succeeds and is allowed.
Disposal
17.
Plainly, in the absence of relevant findings of fact by the Tribunal,
this case must return to the Tribunal for those findings to be made. We cannot
perform that task. The question now is whether the case returns to the same or
a different Employment Tribunal.
18.
Having considered the rival submissions on that question, we are
persuaded that the matter should return to a fresh Tribunal. The earlier Tribunal
expressed robust views as to the credibility of Mr Tadros, as they were quite
entitled to do. However, we understand the Appellant’s perception, whether true
or not in fact, that on the transfer question the original Tribunal will be
predisposed against it when evaluating the evidence which it hears as to events
in Facilities after 11 July 2009.
Postscript
19.
We have dealt in this appeal only with the Tribunal’s PHR judgment and
the issues considered at that PHR. Mr Goldman raised during argument a quite
separate point as to the consultation provisions in regulation 13 of TUPE
which, he submits, apply to the Claimants even if a relevant transfer related
only to the rushes operation of UK in which the Claimants were not engaged.
20.
That matter is not before us and we express no views on that
submission. If the Claimants have a claim under regulation 13, it is separate
and apart from the preliminary issues considered at the PHR with which we have
been concerned. If the regulation 13 question is to be considered at the
remitted hearing before the Employment Tribunal, it will be for the parties or
either of them to seek appropriate directions from the Employment Tribunal.
