Mr D EalesMr P KentMs L Carr (instructed by Solicitor) for claimantDate 23 August 2024
JUDGMENT
[1]The claimant was unfairly dismissed by the second respondent, the principal reason for his dismissal being a relevant transfer pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”).[2]As compensation for unfair dismissal, the second respondent is ordered to pay to the claimant a basic award of £9,645 and a compensatory award capped at the sum of £105,707.[3]The Recoupment Regulations apply to this award and 3.1. the total monetary award is £115,352, 3.2. the amount of the prescribed element is £105,707, 3.3. the dates of the prescribed period is from 6 April 2023 to 21 August 2024, and 3.4. the excess of the total award over the prescribed element is £9,645.[4]The first respondent failed to comply with its obligations to inform and consult pursuant to Regulations 13 and 14 of TUPE. On the basis on them being jointly and severally liable for any award, the respondents are ordered to pay to the 10.2 Judgment - rule 61 March Case No: 1804383/2023 & 1804856/2023 claimant the sum of £30,000 (13 weeks’ pay) as compensation for such failure. JUDGMENT having been sent to the parties on 27 August 2024 and written reasons having been requested in accordance with Rule 62(3) of the Employment Tribunals Rules of Procedure 2013, the following reasons are provided:
REASONS
Issues
[1]This claim involves the potential application of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”). The claimant complains of automatic unfair dismissal, where he says that the termination of his employment by the administrators of the first respondent was by reason of the subsequent transfer of the first respondent’s business to the second respondent. In such circumstances, the second respondent would be liable for any complaint of unfair dismissal.[2]The claimant has confirmed today that he is not pursuing, in the alternative, any complaint of ordinary unfair dismissal against either respondent. The second respondent has confirmed that it is not seeking to rely on Regulation 8(7) where TUPE is disapplied in certain insolvency proceedings.[3]The claimant further brings a complaint alleging a failure to comply with the duty under Regulation 13 of TUPE to inform and consult representatives and in Regulation 14 to elect employee representatives.[4]The first respondent did not attend this hearing and no appearance has been entered on its behalf. Evidence[5]The tribunal had before it an agreed bundle of 610 pages. It heard firstly from Gareth Whittle, a director of the first respondent, and Michelle Kennedy, the first respondent’s chief operating officer. The tribunal then heard from the claimant himself followed by Arvinder Jit Singh, appointed as one of the first respondent’s administrators.[6]Having heard all relevant evidence, the tribunal made the factual finding set out below. Facts[7]The claimant founded the business which became the first respondent in 2011. On its incorporation, he became a director, shareholder and its CEO. The first respondent’s business involved in the manufacture and supply of fine British meat and meat products directly to consumers through an online platform.[8]On 24 February 2022, the first respondent was acquired by a private equity investor, Inverleith LLP. The claimant was retained by the new owners as CEO on a service agreement which included an annual salary of £120,000, a 25% guaranteed bonus, a £12,000 per annum car allowance, family healthcare and life insurance. He also benefited from protection from dismissal by any potential new owner in that he would be paid £100,000 should his employment be terminated in the event of an acquisition or merger.[9]In the second half of 2022, Inverleith became stretched financially across its portfolio of investments. Financial pressures also grew relating to the business of the first respondent. As a result, Inverleith appointed corporate finance advisers, FRP, on 6 February 2023 to seek to identify a buyer for the first respondent as a going concern.[10]On 7 February 2023, the claimant was introduced to Greg Lawless, an adviser to Andy Clarke, a former CEO of Asda who had shown an interest in investing in the first respondent. The claimant introduced Gareth Whittle, his business partner and fellow board director, to Mr Lawless culminating in the creation of a consortium including the claimant, Mr Whittle, his two business associates, Kieron and Christian Barton and Mr Clarke.[11]On 10 February, Ms Arvinder Singh of FRP explained in a presentation to the first respondent’s board that any incoming buyer could acquire the business through a prepack administration whereby employment liabilities could be managed and employees made redundant to aid a sales process and make the business more attractive to purchasers. The tribunal accepts that Ms Singh made a wide-ranging presentation regarding options and she was well aware of the application of TUPE, including in circumstances of prepack administrations. It was very common, she told the tribunal, in such situations for a purchaser to decide to take only certain employees, but the purchaser still acquired the burden of TUPE obligations which could not be carved out of any sale agreement. FRP did not advise any interested parties on the application of TUPE. It was for any prospective purchaser to take their own advice in circumstances where FRP, as potential future administrators, would not be agreeing to bear any such liability. She agreed with the proposition that it was unlawful to make redundancies at the behest of a purchaser before the sale had completed.[12]The claimant and Mr Whittle discussed this advice between themselves considering the approach to be rather brutal – they thought that Ms Singh’s position was that any purchaser could simply cherry pick employees at will. The claimant took his own legal advice which was to the effect that FRP were wrong if they believed that a prepack administration would be effective in reducing employee liabilities.[13]Beyond 22 February the claimant’s discussions with Mr Lawless and Mr Clarke went quiet. The possibility of a solvent sale of the first respondent diminished.[14]As at 18 March 2023, the respondent held stock with a value of around £600,000.[15]On 18 March 2023, FRP emailed Michelle Kennedy, the first respondent’s chief operating officer, a redundancy fact sheet to help prepare for redundancies.[16]During March a meat wholesaler, Hixson, became interested in acquiring the business and visited the first respondent’s site in Ripon. Another company, Eversfield Organic, also showed an interest in a prepack acquisition.[17]On 23 March, FRP were appointed by Inverleith to assist with a prepack sale. Hixson and Eversfield made offers and the highest of them, from Hixson, was accepted, subject to contract.[18]The Eversfield offer had included a deduction from the purchase price of any liability arising out of employee claims. The offer was to buy the respondent’s business, including meat stock and usable packaging, all intellectual property including domain names, the customer database, the website licence and infrastructure, all computers, all cars, all wholesale contracts and all movable equipment except office furniture. The primary exclusions were of any property leases and any ongoing employment contracts as well as supplier contracts. Ms Singh agreed in crossexamination that Eversfield would have taken their own legal advice to the effect that TUPE liabilities would transfer. On the other hand, she considered that Eversfield saw their proposal as a pure asset purchase.[19]The Hixson offer of 23 March was, without argument, to acquire the business as a going concern with the parties recognising the need for redundancies to be made for ETO reasons and that they would cooperate to ascertain which employees would be affected, Hixson wishing to retain around 40 employees including Ms Kennedy, Mr Duggan, Finance Manager and Mr Murphy from the management team, but with no reference to the claimant. The first respondent was to deal with redundancies in a way approved in advance by Hixson in accordance with TUPE. A draft sale and purchase agreement recognised the application of TUPE.[20]Hixson were due to confirm to FRP by Friday 31 March which employees they had determined ought to be made redundant presale. The claimant’s view was that FRP were unconcerned about potential unfair dismissal claims which Hixson might have to deal with and were focused on ensuring that the deal completed. His view was that FRP’s position was that they were not lawyers and, it seemed to him, believed they could do as they chose.[21]Ms Singh envisaged, what she explained was a classic prepack situation, where a sale would be agreed with funds transferred in escrow. FRP would then be appointed as administrators and immediately thereafter would make redundancies of employees who had stayed with the company in administration. The purchaser would acquire the employees that had agreed to take on. It was for the purchaser to take advice and come to a view as to TUPE risks.[22]The claimant emailed Mr Whittle on 28 March saying that he had been told by FRP they were making redundancies and that he should take advice. Mr Whittle described Hixson as walking into a car crash. The claimant referred to a prepack arrangement, TUPE and that “he would be an unfair dismissal”. Mr Whittle told the tribunal that at the time he was uncomfortable around the conversations FRP were having with Hixson and said that it seemed “pretty brutal”.[23]On 28 March, in a series of WhatsApp messages, the claimant and Ms Kennedy considered the possibilities, them having done some Google research on the application of TUPE in an insolvency situation. When discussing his possible dismissal, the claimant referred to that being done to aid the sale with which Ms Kennedy agreed, albeit understanding that whether or not this might be an unfair dismissal could be a grey area. She noted that one lawyer and the respondent’s HR consultants were both saying “unfair dismissal” so that “there must be something in it.”[24]On 29 March, two senior managers from Hixson came to the Ripon site and went through an employee list with Ms Kennedy and Mr Duggan to highlight which employees would not be needed in the future. A list of employees was to be given to FRP, who would make the redundancies presale. A telephone call those Hixson managers made to their lawyers was overheard by Ms Kennedy and Mr Duggan, who understood that they were being advised that all employees would need to transfer in accordance with TUPE and that Hixson’s plan would not work legally.[25]On 31 March Hixson indicated that they would pull out of any prospective purchase. Ms Jones of FRP emailed the claimant that evening confirming the claimant’s awareness by then that they had identified a significant liability associated with his employment costs, thus leading to them seeking to agree a compromise of this liability with the claimant. Hixson’s position had not changed and they had confirmed that they would be unable to proceed unless a compromise could be agreed. She said that they were acutely aware of the very challenging position the company found itself in and the urgency of proceeding and completing a transaction as soon as possible i.e. on Monday 3 April in order to protect the vast majority of jobs and allow customer orders to continue to be met. Ms Jones asked the claimant again to consider his position regarding compromising his employment liabilities.[26]On 1 April, in an attempt to stop Hixson walking away, the claimant was approached by Mr Whittle and then FRP to consider a potential settlement so as to limit any liabilities which might pass to Hixson pursuant to his contract of employment or its termination. In a WhatsApp message on 1 April, Mr Whittle told the claimant that Ms Singh was clear that Hixson had an awareness that there could be a liability from claims “for the way it’s being done. But are comfortable with the risk.” In the messaging conversation, he also stated: “Seems so wrong doesn’t it. Knowingly breach TUPE rules to get a deal done. And accepting there could be claims”. The claimant responded that Ms Singh was “’upselling’ the incorrect fact that you can simply pick and choose who you take over”[27]The claimant wrote to FRP on 1 April expressing his concerns regarding the approach they were taking.[28]On 2 April the claimant held a telephone call with Ms Singh and a colleague at FRP during which he considered that he was being put under extreme pressure to relinquish his employment rights so that the sale could be completed. The claimant told the tribunal that he was made to feel that if he did not agree, he would be responsible for the fate of the rest of the workforce as Hixson was threatening to withdraw from a purchase because of the claimant’s employment costs.[29]Ms Singh emailed the first respondent’s directors on 2 April. As regards the points they needed to discuss, she referred to the Hixson offer as currently withdrawn, but being a potential sale of the business and assets with trading continuing from the Ripon site and the retention of some employees, details of which were still to be confirmed.[30]She said that an update would be provided on further talks with Eversfield over the weekend, which could result in a sale of assets, customer list and brands amongst other things, but with there stated to be no continued trading and all employees being made redundant.[31]The final point to discuss was that if there was no progression on either of those options there would be discussion on the closure of the business on the subsequent Tuesday/Wednesday with all employees being made redundant and a subsequent sale of the assets post administration.[32]Ms Singh told the tribunal that the feedback she had got from Ms Jones was that the Hixson deal could not go forward. She therefore had to go back to the other offer on the table at the time, which had therefore prompted a conversation with Eversfield on Sunday 2 April.[33]When put to her that, if she made the employees redundant, the situation would be more attractive to Eversfield, she said that the redundancies would be made after an administration and Eversfield would still carry the risk of TUPE as would be reflected in any sale agreement. They still would have the risk and might still want a clawback.[34]When put to her that a business without employees would be more attractive than one with them, she said that the potential sale being discussed was of a partial going concern and some employees transferring. If the employees were no longer there, then there would be no going concern. It would only be an asset sale and the only person at that point with an asset offer was Eversfield. If they, as administrators, could not effect an asset sale, they would have to shut everything down and make everyone redundant. There was ultimately no Eversfield offer which is why they, FRP, decided to seek an asset sale on 6 April. When put again that the business was more attractive to Eversfield without employees, she said that it could have looked more attractive. She agreed that they didn’t want to take any employees.[35]FRP arranged a video call on 3 April with the claimant, Tom Hixson and his lawyers. The message to the claimant was similar to that which had been delivered by FRP the previous day.[36]On 4 April, the Hixson sale (finally) fell through and FRP advised the board that it was due to the claimant’s TUPE liabilities. Hixson said that the liabilities associated with the purchase were too great but that they might be interested in acquiring specific assets.[37]At 13:29 on 4 April Ms Jones emailed Santander bank saying that following the withdrawal of the only remaining interested party, the strategy had moved to an administration appointment and an orderly wind down of the business and assets. They were already aware of significant interest in the intangible assets of the company, reference being made to the brand, website and customer list, and they would restart the sale process immediately following appointment. They would also seek to secure the best value for the remaining stock. The release of a payment to a delivery firm was recommended to enable over 1000 customer orders to be made for the Easter period. Ms Jones pointed out the costs associated with not honouring those deliveries and the impact on intangible assets/brand value of over 1000 customers not receiving their orders.[38]When put to Ms Singh that this communication was misleading as Eversfield was still interested, Ms Singh recognised that they were, but in an asset purchase only. She said, however, that it was wrong for them to accept Eversfield’s offer without testing the market for alternative purchasers of assets only. Ms Singh’s undisputed evidence was Mr Whittle and another director funded wage costs from 1-6 April 2023.[39]Ms Singh emailed the claimant from abroad on 4 April 2023 reaffirming that on Friday 31 March they received an email from Hixson’s lawyers stating that they were unwilling to proceed with their offer, albeit still to be confirmed in the absence of a settlement with him. It was extremely likely that if a revised offer was received it would reflect a reduction in the sum agreed in any settlement with him. She said that she was not aware of the detail of the claimant’s discussions with Hixson. If any offer from them did not maximise the return to creditors, she said that she would have to propose an alternative i.e. effectively administration. As such, she would then transact any sale in the best interests of all creditors. If that was Hixson’s offer, saving jobs and continued trading would be preferable. She referred to a business called Musclemeats considering a formal offer and asked the claimant to confirm the names of any other individuals who had attended the site over the weekend. Ms Singh agreed in cross-examination that it was in her thoughts that they could get a revised offer from Hixson. She also agreed with the proposition that the possibility of not having to acquire a £200,000 liability (a reference to the claimant’s termination costs) would make the business more attractive to any purchaser, including Hixson.[40]There is no doubt that the respondent was in a difficult financial situation and to have continued to trade would have required support from the bank. The claimant considered that such support may have been forthcoming had FRP given them more information regarding the potential offers for the business.[41]At 06:40 on Thursday 6 April, Ms Jones emailed her colleague in FRP, Mr Hopkins stating: “I’d like you to lead the interested parties reapproaches on Farmison post appointment to secure a sale of the brand/IP/customer list etc along with other assets if interested parties want those too.” Ms Singh told the tribunal that the process to be commenced was very much to “liquidate” the assets. When put to her that Eversfield wanted to develop the brand, she said that they were not just looking at Eversfield, but ultimately a number of parties to see if they would make offers for the assets. She agreed, however, that Eversfield’s issue was that they did not want the property lease and the employees.[42]On 6 April, the first respondent was placed into administration, the appointment of FRP as administrators occurring at 10:05. The claimant and around 75 others were made redundant by the administrators with 5 employees retained including Ms Kennedy, Mr Duggan and Mr Murphy and 2 employees involved in the storage and packing of the meat stock. The management roles were the same roles identified by Hixson as the management positions to be retained. Ms Singh said that it was usual in an administration to retain a skeleton staff and these were the people who she considered who could ensure that the first respondent complied with its statutory duties in terms of accounting and record-keeping whilst being in a position to sell the remaining stock. She felt that the individuals retained could give the administrators the information they needed. She did not say that the claimant could not equally have provided that information. There was no election of employee representatives, no written advance information given to employees regarding the administration or any possible options. There was no consultation with any employees prior to the administration and no advance notification of possible redundancies. Those made redundant were given a fact sheet and told how to claim for amounts owed through the redundancy payments service.[43]FRP had collected information relating to the respondent’s assets and prepared a “teaser” email offering them for sale. This was firstly sent to 6 interested parties with whom preliminary discussions had taken place during the attempted sale process in February and March. Further teaser emails were sent to interested parties thereafter. One such communication was sent to Eversfield at 15:25.[44]However, at 13:22 Eversfield emailed Ms Singh with a revised offer, stated to be for the assets of the first respondent. This assumed completion on 12 April 2023 or before. Those items to be transferred to them included the first respondent’s brand assets including all IP and domain names, any software licences, customer database, the website licence, computers, all butchery, production and dispatch related hardware and software, any cars or vehicles, all wholesale contracts and all movable equipment except office furniture. No reference was made to employees or employment liabilities. Ms Singh was unable to tell the tribunal what specific contact had been made with Eversfield by FRP other than say that Mr Hopkins might have spoken to them prior to them making this offer. The tribunal is clear that someone from FRP must have.[45]At 13:28 Mr Duggan sent the claimant a WhatsApp message saying that Eversfield had already put in an offer. Indeed, there was other interest in acquiring the first respondent or its assets.[46]The claimant and Mr Whittle managed to reconstitute the aforementioned consortium and an offer of intent was sent to FRP on 11 April. The consortium made representations to FRP not to dispose of all the stock. The acquisition of remaining stock was considered important by the consortium and to ensure that it was not separately disposed of by FRP. A confirmed bid was then sent by the consortium’s lawyers on 14 April. That offer expressly reflected the proposed purchase of the first respondent’s business as a going concern including with the acquisition of stock, equipment, intellectual property rights, customer lists and goodwill. It included an intention to re-employ a number of the first respondent’s employees who had just been made redundant on their previous terms and conditions of employment and with continuity of employment preserved. There was a recognition of the application of TUPE to the transaction.[47]As at 14 April, 11 interested parties had submitted offers. Ms Singh classified these as 4 offers exclusively for intellectual property assets (she put a further offer from Hixson in that category), 3 exclusively for physical assets and 4 for a combination of intellectual property and physical assets (including Eversfield).[48]On 17 April 2023 the claimant was told by Mr Clarke that he was no longer part of the consortium team. This came as a significant shock to the claimant.[49]The second respondent was formed/identified as a vehicle for the acquisition of the first respondent by the consortium.[50]Revised offers were made by Eversfield and the second respondent by 17 April 2023. Heads of terms and draft Sale and Purchase Agreements were supplied then to both. As at 19 April, Ms Singh told the tribunal that it was still entirely possible that Eversfield would be the successful bidder.[51]The sale to the second respondent was completed on 21 April 2023. The ultimate Sale Agreement provided for the purchase of assets including plant and equipment, stock, intellectual property, motor vehicles and goodwill. The property was excluded, but with separate provision for a licence to occupy. As regards employees, the 5 employees not dismissed by the administrator were regarded as transferring employees. The second respondent indemnified the first against any claim relating to any employees including any who did not transfer to the second respondent pursuant to TUPE. At the point of sale, stock was valued at £25,000, but Mr Whittle accepted that that was not necessarily the true value of stock remaining in the business. Prior to the sale the administrators had appointed Hilco to value the meat stock and they reverted with a figure of £189,000. A substantial number of those dismissed by the administrators were subsequently re-employed by the second respondent. Mr Whittle told the tribunal that this was on new terms and conditions of employment.[52]The claimant subsequently applied for and received from the Insolvency Service his statutory redundancy pay entitlement and an amount in respect of a failure of collective consultation in respect of redundancy.[53]On 12 June 2023, Mr Andy Adcock was appointed as a new CEO of the second respondent on the same salary as the claimant had previously enjoyed. Applicable law[54]Regulation 7 of TUPE provides that: “(1) Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee is to be treated for the purposes of Part 10 of the 1996 Act (unfair dismissal) as unfairly dismissed if the sole or principal reason for the dismissal is the transfer. (2) This paragraph applies where the sole or principal reason for the dismissal is an economic, technical or organisational reason entailing changes in the workforce of either the transferor or the transferee before or after a relevant transfer. (3) Where paragraph (2) applies—(a) paragraph (1) does not apply;(b) without prejudice to the application of section 98(4) of the 1996 Act (test of fair dismissal), for the purposes of sections 98(1) and 135 of that Act (reason for dismissal)— (i) the dismissal is regarded as having been for redundancy where section 98(2)(c) of that Act applies; or (ii) in any other case, the dismissal is regarded as having been for a substantial reason of a kind such as to justify the dismissal of an employee holding the position which that employee held. (3A) In paragraph (2), the expression “changes in the workforce” includes a change to the place where employees are employed by the employer to carry on the business of the employer or to carry out work of a particular kind for the employer (and the reference to such a place has the same meaning as in section 139 of the 1996 Act).”[55]The authorities before this tribunal all relate to cases before 31 January 2014 when, pursuant to an earlier version of TUPE, there was an automatic unfair dismissal if the sole or principal reason for the dismissal was the transfer itself or a reason connected with the transfer that was not an economic, technical or organisational reason entailing changes in the workforce (“ETO reason”). Given this wording, earlier authorities often considered whether to accept a a purported ETO reason put forward for a dismissal. It had been held (including in the Spaceright case below) that an administrator’s desire to make a business more attractive to a potential (but as yet unidentified) transferee did not amount to an ETO reason for dismissing the business’s chief executive.[56]The effect of the wording of (new) Regulation 7(1) of TUPE is that an employee is unfairly dismissed if the sole or principal reason for dismissal is “the transfer”. Dismissal in those circumstances is then deemed to be automatically unfair.[57]If the sole or principal reason for dismissal is the transfer, that is decisive and there is no need or purpose in considering the alternative possibility of the reason for dismissal being for an ETO reason. The claimant here does not seek to assert that there was an ordinary unfair dismissal for which either respondent is liable.[58]The tribunal must, therefore, answer the question of whether the transfer was the sole or principal reason for dismissal. This is fact sensitive, but will include consideration of the factors operating on the mind of the person who decided upon the dismissal, in this case the administrators, the timing of the dismissal and whether the specific transferee had been identified by the time the dismissal took place. Neither party is maintaining that, had the sale to the second respondent taken place immediately prior to the administration, there would not have been a relevant transfer pursuant to TUPE.[59]The ECJ in P Bork International stated that particular note should be taken of whether the dismissal in question took place at a time close to that of a relevant transfer and whether the employee was subsequently re-engaged by the transferee. It might be said that the closer in time a dismissal is to a relevant transfer, the more likely the transfer will be found to be the principal reason for dismissal. However, even where dismissal occurs due to employer’s need to reduce the workforce, it may be a matter of coincidence that the dismissal takes place around the time of a relevant transfer - a dismissal might well have occurred regardless of the transfer process. A struggling business might need to dismiss employees owing to financial constraints, regardless of an impending transfer.[60]It is well established that the “reason” for dismissal is “a set of facts known to the employer, or it may be of beliefs held by him, which cause him to dismiss the employee” (see Abernethy v Mott, Hay and Anderson 1974 ICR 323). An employee asserting an automatic unfair dismissal acquires a burden of showing some evidence to support his or her case. If an employer does not then show to the satisfaction of the tribunal that the reason for dismissal was the one it puts forward, it is open to the tribunal (though not necessary) to find that the reason was that asserted by the employee.[61]In this case, a key consideration in determining the reason for dismissal relates to the lack of identification of the second respondent as the putative transferee at the time the decision to dismiss was taken.[62]The tribunal now refers to the Court of Appeal decision in Spaceright Europe Ltd v Baillavoine [2012] ICR 520. The case involved the dismissal of a chief executive by administrators on the day the employing company entered into administration. A month later, the administrators sold the assets and business to the respondent transferee. The chief executive was dismissed at the same time as 43 other employees, but where the employment tribunal concluded that he was dismissed so as to enable a purchaser of the business to acquire the business and assets without the continued employment of its chief executive officer. It was said that the claimant’s salary of £120,000 might also have presented a problem for a prospective purchaser. The reason for his dismissal was peculiar to him and his circumstances and did not apply to the wider workforce.[63]Mummery LJ noted that the employment tribunal had followed a line of authority beginning with Harrison Bowden Ltd v Bowden [1994] ICR 186, where the EAT rejected a submission that “the transfer” meant that there must, at the time of the dismissal, be a transfer in existence, or at least a prospective transferee. They said that such construction: “…would open a loophole in this legislation which presumes continuity of employment and attempts to ensure the protection of workers when undertakings are transferred. There is also a conceptual difficulty in distinguishing between a prospective transferee and the actual transferee. Why should it make any difference if there is one front-runner at the point of dismissal who is then perhaps, as the example was put to us, gazumped by another one but in the meantime employees have been dismissed. If their dismissal was connected with the transfer one would expect this legislation to protect them.”[64]Mummery LJ noted that the judgment in Harrison Bowden went on to refer to “the transfer” as being a reference to “’a transfer’ which actually takes place which these Regulations contemplate by the definition of ‘the relevant transfer’”.[65]He later quoted the EAT judgment in Morris v John Grose Group Ltd [1998] ICR 655 where it was said: “in our view, however, the words ‘the transfer’… do not by necessary construction have to refer to the relevant particular transfer which has actually taken place … The words ‘the transfer’… could perfectly well mean ’transfer’ or ‘a transfer’.” That view was said in Morris to be more consistent with the broad scope of the Acquired Rights Directive from which TUPE derives.[66]Mummery LJ endorsed the approach taken in Harrison Bowden and Morris. The natural and ordinary meaning of the language of (old) Regulation 7(1) does not require a particular transfer or transferee to be in existence or in contemplation at the time of dismissal.[67]The Court of Appeal in Kavanagh v Crystal Palace FC Ltd [2014] IRLR 140 determined that the tribunal had not erred in finding that the reason for dismissal had been for an ETO reason, where liability did not pass to a subsequent purchaser of the football club. There, Lord Kay recognised the tension between the policy of protecting employees and of encouraging the achievement of a better result for a company’s creditors than would be achieved on liquidation. The tribunal’s resolution of this tension, through Regulation 7, he recognised, was an extremely fact sensitive process. In that case, the administrator had needed to reduce the wage bill in order to continue the running of the business and to avoid liquidation. There were unique features pertaining to the financial affairs of a failing football club, such as the seasonality of its business. Just as Spaceright had been factsensitive, so too was the present case.[68]The second respondent here has placed reliance in submissions on passages in Harvey on Industrial Relations and Employment Law where it is recognised that some dismissals which were automatically unfair under the pre-2014 law would not be now. Perhaps one example, it suggests was where earlier authorities held that a dismissal could be “connected with” the transfer even if the transferee had not yet been identified. Arguably the result would have been different if the test was whether the transfer was the sole or principal reason for the dismissal. The earlier authorities are predicated on the basis that the dismissals were “connected with” the transfer. A passage of Lord Kay in Kavanagh is quoted where he said: “It is common ground that the principal reason for the dismissal was not “the transfer itself” because, at the effective date of termination, no agreement had been reached in relation to the transfer”.[69]This tribunal does not consider that Lord Kay was calling into question the series of authorities (up to and including Spaceright) which he still regarded as good law, but obviously with the need to apply them in a fact sensitive arena. Mummery LJ in Spaceright had also noted a passage in Morris which stated: “in our judgment the tribunal should have asked whether a transfer to any transferee who might appear, or any reason connected with such a transfer, was the reason or principal reason for his dismissal.” Mummery LJ was there endorsing an approach where clearly, under the old provisions, there could be an automatically unfair dismissal where the exact transferee had not been identified at the point of dismissal whether the reason for dismissal was the transfer or any reason connected with it. Lord Kay was not obviously seeking to say anything different – he certainly cannot have been contemplating the new iteration of Regulation 7. In reality, the availability (at the time of the events determined in Kavanagh) to claimant representatives of the easier route through to success of showing that dismissal was connected to the relevant transfer meant that cases were habitually argued on that basis. The passage of Lord Kay, in context, appears to be simply a recognition that the “actual” transfer which occurred cannot have been the reason for dismissal in anyone’s mind at the point of dismissal.[70]The Department for Business Innovation and Skills guide to TUPE states that “the transfer might be the sole or principal reason even if that reason might previously have been considered to be “connected with” the transfer, rather than the transfer itself. It will depend upon the circumstances in any particular case.”[71]The question now for tribunals is not whether dismissal was for a reason connected with the transfer, but rather whether the sole or principal reason was the transfer. The tribunal recognises that the words it must apply are narrower. It is not now enough for the dismissal to be connected with the transfer. The transfer must be the sole or principal reason for dismissal.[72]The outcome in Spaceright might have been different had the focus been on whether the dismissal was for reason of the transfer rather than a reason connected with it. On the other hand, it does not necessarily follow that there would have been a different outcome. The analysis of the situation would simply have been through a different lens of enquiry.[73]Fundamentally, the Court of Appeal in Spaceright approved the reasoning of the EAT in Morris that the reference in the old iteration of Regulation 7(1) should be interpreted to cover “a transfer”. The tribunal considers that this remains authoritative and is equally capable of being applied to the current wording requiring the reason for dismissal to be “the” transfer rather than a reason connected with “the” transfer. “The transfer” can still mean “a transfer”.[74]The tribunal is fortified in its approach by the recognition of tribunals over the years that TUPE should be interpreted in so far as permissible with the purpose of TUPE and the Acquired Rights Directive, from which it originated, to protect employment.[75]Applying the legal principles to the facts as found, the tribunal reaches the conclusions set out below.
Conclusions
[76]The tribunal has inevitably given primary consideration to the evidence of Ms Singh and evaluated that against the factual background.[77]It would say, at the outset, that it does not regard her as a witness who has done anything other than seek to give an accurate account of her perspective of the situation she was faced with. Reference has been made to an inaccurate statement in her witness evidence as to the existence of stock at the point of ultimate sale and in her declaration to the court when appointed as an administrator. The tribunal is uninfluenced by these in the conclusions it has reached.[78]Further, whilst references have been made by witnesses to the administrators potentially adopting a somewhat brutal approach which did not accord with TUPE, it is unfair to categorise her in this way. As administrator, her primary obligation was to the first respondent’s creditors. In the course of the lead up to the administration, she inevitably became involved in discussing various options and how deals might be structured, but on the basis at all times that it was for any purchaser to take their own advice as to the application of TUPE and come to their own assessment as to the management of risk. This would inevitably have been in circumstances where, as an administrator, there was no possibility of the company in administration bearing the burden of risk through, for instance, any agreed indemnities.[79]On the balance of evidence, the tribunal does conclude that the principal reason for the claimant’s dismissal was a relevant transfer pursued to TUPE, the transfer of the first respondent’s business to the second respondent on 21 April 2023.[80]The tribunal accepts and does not doubt that the first respondent was in significant financial difficulties and could not simply continue for much longer to trade and incur further liabilities, not least the continuing payroll costs.[81]However, the first respondent had immediately before the administration been negotiating a sale of its business. It had first explored the possibility of a solvent sale, a potential sale indeed in which the earliest iteration of the consortium, which ultimately acquired the business through the second respondent, had been interested.[82]The focus then shifted to a sale through the mechanism of a prepack administration with a recognition that a prepack administration might make the business more attractive to purchasers (even if it did not provide an answer to potential TUPE liabilities). Up until 4 April there were 2 serious prospective purchasers. Hixson certainly was considering a business purchase in circumstances where it intended to continue to operate the business from its current site in Ripon. For it, the dealbreaker was its inability to come to an agreement whereby the claimant would forego the benefits due to him under his employment contract.[83]Eversfield were not in reality seeking to purchase only specific assets. Their offer involved stock, equipment, customer lists, the first respondent’s online platform, its brands, goodwill and intellectual property. The proposal essentially was to acquire the business, but to relocate it some distance away from Ripon. Other than the premises in Ripon, the only thing it did not want to acquire was the employees. It had put forward its original offer on the basis of a clawback from the purchase price in respect of any employment liabilities incurred.[84]The administrators were appointed with the primary intention that they would move immediately into a new phase whereby they would seek to realise the maximum value for the first respondent they could for the benefit of its creditors. Whilst teaser emails were aimed at obtaining offers for the first respondent’s assets, the administrators were aware that the dismissal of employees changed inevitably the playing field and the view which any prospective purchaser might take, what it might bid for and the basis of any offer. The tribunal does not conclude that the administrators had written off any potential for renewal of interest from either Hixson or Eversfield – far from it. Both did revive their interest. Whilst not being able to evaluate with certainty the level of attractiveness, the administrators knew that the first respondent’s business without employees would present a more attractive proposition. It would ease a continuing sale process. The Hixson offer only fell away on 4 April and Ms Singh believed there might be an offer and an interest in specific assets – they were likely to be significantly more interested in a business acquisition with the claimant no longer employed.[85]It obviously had a very quick effect on the view taken by Eversfield, with whom the administrators must have been in continuing dialogue and who must have been weighing up their response to what they knew was about to happen in terms of the administration and the dismissal of employees. The timing and speed of their revised offer is noteworthy. What they were seeking to acquire in their new offer was not materially different from their proposition prior to the administration, but with now no reference to employment liabilities. Had their offer been accepted and progressed to completion, it is likely that there would have been a relevant transfer under TUPE, this being in reality an acquisition of an e-commerce business where the property/its location was not a key factor in the undertaking’s core identity.[86]Other bids were made to acquire, at the very least, elements of the business of the first respondent. The administrators were preparing early in the morning in advance of the administration to drum up new interest and their internal correspondence refers to this possibly including the brand, customer lists and other assets – effectively, therefore, potentially a business rather than bare asset sale. Teaser emails went out to prospective purchasers soon after the administration, although not soon enough to prevent Eversfield having a head start, given the advance information provided to it by the administrators.[87]What the administrators left in place, in terms of the management team remaining in their employment, closely aligned with the Hixson proposal - the claimant’s employment had ended in circumstances where his liabilities had been decisive in Hixson’s withdrawal of interest. He was the member of the core management team whose employment was not continued. Whilst the tribunal has heard that the administrators chose the particular roles they required to be continued post administration in order for them to meet their liabilities, the tribunal is not left with a clear understanding as to why, for instance, the retention of a chief operating officer rather than the chief executive and founder was deemed necessary. There is no explanation of any form of selection for redundancy. The claimant not being selected to continue was most likely to have been influenced by considerations of cost, but the additional cost of retaining him would have been much less significant for the administrators whose involvement was only ever likely to continue for a matter of weeks rather than months, than to any prospective purchaser of the business, part of it or its assets. The circumstance of the claimant’s dismissal was not the same as of the other members of the workforce dismissed at the same time. It is noted that Hixson did make a new offer – Ms Singh says that this was for intellectual property only, albeit intellectual property was a significant part of the first respondent’s business.[88]On 21 April the business of the first respondent was acquired by the second respondent. This indeed was no mere asset purchase, but the acquisition of the business as a going concern. The offer and completed acquisition is indicative then of there still being a functioning business to acquire, including with a not insignificant amount of saleable stock, rather than one that had been in the process of a form of liquidation, for instance, where its assets had been sold off on a piecemeal basis in the interim period. The offer made by the second respondent was on the basis of their acquisition amounting to a relevant transfer pursuant to TUPE. Following completion, a number of employees were to be re-employed on existing terms and with continuity of service. A substantial number have been reemployed. The sale agreement provided for the transfer of the management team which had remained in place. The sellers ongoing obligations were recognised not to include liabilities arising under TUPE. Whilst in no way determinative, the second respondent’s position when the purchase offer was first made made (and with legal advice), was that TUPE would apply in full appreciation that the claimant and other employees had been dismissed before the second respondent emerged as a prospective purchaser.[89]In all of the circumstances, the claimant was indeed dismissed for reason of the relevant transfer, the transfer of the first respondent’s business to the second respondent. He was therefore unfairly dismissed.[90]Prior to his dismissal there had been no election of representatives for the purpose of providing information and potentially consulting with affected employees in relation to a relevant transfer (and no provision of information/consultation) such that the tribunal must inevitably conclude that the first respondent failed to comply with its duties under Regulation 13 and 14 of TUPE. The claimant’s complaint of a failure to inform or consult pursuant to Regulation 15 must therefore succeed in circumstances where the first and second respondent are jointly and severally liable for any award.
Remedy
[91]The tribunal heard additional evidence from the claimant on the issue of remedy. The onus of showing a failure to mitigate lies on the employer as the party who is alleging that the employee has failed to mitigate his loss. tribunals are under no duty to consider the question of a failure to mitigate unless the employer raise it and it uses some evidence of failure to mitigate. The tribunal should ordinarily identify what steps have been taken by the claimant to mitigate his loss, find the date upon which such steps would have produced an alternative income and then reduce the amount of compensation by the amount of income which would have been received. Whether an employee has done enough to fulfil the duty to mitigate depends on the circumstances of each case and is to be judged subjectively. Nevertheless, the tribunal should not simply accept the subjective view of the claimant – the tribunal’s task is to consider all of the circumstances in deciding whether the claimant has acted unreasonably in failing to find fresh employment. The effect of the dismissal on the individual employee may well be relevant in determining whether there has been a failure to mitigate.[92]The claimant had not as at the date of this tribunal hearing managed to obtain alternative employment. He described it as being very challenging to look for a job especially in his industry and sector and in circumstances where his dismissal had had a great effect on him resulting in a loss of confidence. He said that there was a view in the industry and supply chain that the problems suffered by the first respondent were down to him. He had been signed off as sick from 22 December 2023 in circumstances where he would be on medication certainly through until November 2024. By 2025 he hoped that he could put the situation behind him.[93]The claimant had been dismissed on 6 April and was not in the frame of mind to start to reach out to potential business contacts until the end of June. That is unsurprising and not unreasonable in the circumstances.[94]The claimant had worked for himself and built up businesses for the previous 20 years specialising in e-commerce and restaurants. He had done some marketing consultancy work many years previously and had brought brands to market, including those creating electronic reservation systems. He had opened restaurants in Leeds, Manchester and London. He had to refocus and understand how strong his CV was and gain an understanding from people in the recruitment industry as to what might be available for him. There were not, he said, off the shelf positions for people of his level of experience given the type of impact he could have.[95]In the earlier part of his job search from July 2023 he had relied on approaches to business contacts.[96]He had been in conversation with Vida Villas from June 2023 about them adding a digital arm to their business. Approaches had been made to the businesses of Field and Flower and Oberon in November 2023.[97]He made a specific application for an interim MD role in Harrogate on 1 December through an executive recruitment consultancy but had not received a response. There had also been approaches to Aramark and in respect of a business development role in event catering on 28 November 2023.[98]The claimant had been on jobseekers allowance from 26 May 2023 and had had to attend fortnightly meetings to show that he was making appropriate attempts to get new employment. His benefits had been continued on the basis that he had. From 18 January 2024, he had been on employment support allowance reflecting his poor state of health. The claimant’s sick pay provisions in his contract of employment with the first respondent were for full pay to be paid for an indefinite period during any period of sickness.[99]In terms of the future, the claimant said that he would lower his expectations and concentrate on looking for work in digital marketing and food. He was willing not to write off any location if work was available and was looking at how he might move into different areas where he could make a societal difference by, for instance, helping young entrepreneurs and possibly lecturing in a college setting.[100]It was the claimant’s evidence was that he would have remained interested in working as the second respondent’s chief executive even though not part of the consortium in full recognition that he thought his style and that of Mr Clarke might clash. At the end of the day, he said that he was the company’s founder and it was his vision which they were continuing. Whilst he had subsequently entered into litigation against the second respondent’s owners, separate from these tribunal proceedings, he said that had he been employed by the second respondent, that situation might have been avoidable.[101]The second respondent has submitted no evidence of potential employment opportunities available for the claimant to apply for or other opportunities which it says the claimant ought reasonably have pursued.[102]In conclusion, the claimant held a very senior position in a business he had founded and had worked in for more than 10 years. He was in his mid-50s at the point of his dismissal. This was a niche business combining specialist meat products with online selling. The claimant was shocked to lose his position in the circumstances which occurred and would have inevitably required a period to adjust and take stock. He had satisfied the DWP that he was making proper attempts to seek work so as to qualify for JSA. He did particularly in July 2023 and November 2023 make specific approaches regarding possible new ventures and employed positions. The job searches are small in volume, but, in the context of the claimant’s employment history, skills and the level he had reached, unsurprising. His sickness was not unrelated to his dismissal.[103]The respondent has not shown that, if the claimant had taken additional steps, he would have obtained alternative employment and at what level. Nor is there any evidence that if the claimant had been employed by the second respondent, that employment would have ended or when or for any particular reason. The tribunal has no basis for finding that he would not have, for instance, remained as CEO, but not part of the second respondent’s ownership. The claimant ought at a minimum to be compensated for his immediate loss up to the date of this hearing.[104]There is no dispute regarding the calculation of a basic award entitlement in the sum of £9,645. Such entitlement arises still in circumstances where the claimant has recovered a similar sum in respect of a statutory redundancy payment on the basis that it was owned by the first respondent. Whether that amounts to any form of double recovery is a matter for the Insolvency Service, not the tribunal.[105]There is no challenge to the claimant’s figure of net weekly earnings of £1,565.36 which is taken from one of his last payslips. This gives a figure of net loss for the 72 weeks from the date of dismissal until today’s date of £112,705.92. He would also in such period have received a bonus of £30,000 which would have equated to a net figure of £16,500 tax rate of 45%. The claimant was also in receipt of significant benefits in kind. The claimant has received it appears from the Secretary of State an amount in respect of 10 weeks’ notice at the applicable cap on the amount of a maximum week’s pay. Even allowing for that, the claimant’s losses up to the date of this hearing clearly exceed a net sum greater than the applicable statutory cap for a compensatory award of £105,707. That is indeed before any sum for total net loss is grossed up to take into account that the great majority of this amount will be subject to tax. It is therefore just an equitable to make a compensatory award at the maximum level of £105,707.[106]The principles for determining the size of an award for a failure to inform and consult pursuant to TUPE are similar to those applicable in the case of a protective award as set out in Susie Radin Ltd v GMB [2004] ICR 893. The award is designed to be punitive, not to compensate the employee for loss suffered. The calculation starts at the maximum amount where there has been no consultation and might be reduced to reflect the seriousness of the breach and any mitigating factors.[107]Whilst there has been a declaration that the claimant is entitled to a protective award in respect of a collective redundancy (and the tribunal does not consider that a single dismissal should give rise to such an award and an award for a failure to inform and consult pursuant to TUPE), this tribunal can only consider what ought, on the actual facts, to be awarded to the claimant. How any double payment is recovered is not a matter for the tribunal. The tribunal does not know how much the claimant has been able to recover of any protective award in this insolvency situation. In the circumstances of this case, there was a complete failure to comply with TUPE’s requirements as to the election of representatives and provision of the requisite information to them. There was no election of any representatives and no provision of information or consultation with the employees, directly or indirectly. The starting point in terms of compensation is of 13 weeks pay. There is no evidence from the first respondent as to any particular circumstances which should cause the tribunal to consider a reduction in an award from that level. The claimant is therefore entitled to an additional award based on a gross weekly wage of £2307.69 which gives a sum of additional compensation payable to the claimant of £30,000.