Ms F Brookman v The Creation Agency Ltd (Involuntary liquidation) and Cleo Marketing Ltd: 3313571/2023

EMPLOYMENT TRIBUNALS

Case No 3313571/2023

Between

Ms F BrookmanClaimant

The Creation Agency Ltd (Involuntary liquidation) and Cleo Marketing LtdRespondent

Before

Employment Judge Andrew Clarke KC

Date 21 November 2024

JUDGMENT

[1]The claimant’s various claims are adjourned to be heard on 7 November 2024 before a judge alone via CVP.

REASONS

Background

[1]The claimant was employed by the first respondent as a Senior Digital Designer from 8 May 2017 to 6 July 2023 when she was dismissed. That dismissal took place in the context of the first respondent being about to enter into a Creditors’ Voluntary Liquidation. The claimant was employed by the second respondent as a Studio Lead and Senior Designer from 21 August 2023. There appears to be some connection between the first and second respondents in that at least one senior employee and director of the first respondent is also a senior employee and director of the second respondent.

[2]On 30 November 2023 the claimant commenced the present claim against both respondents. Her primary case is that there was a relevant transfer of an economic entity between eh first and second respondents with the effect that (pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 2006) the claimant’s employment and various associated rights and liabilities transferred to the second respondent.

[3]The claimant makes claims for a basic award for automatic unfair dismissal, a declaration and financial compensation consequent upon a failure to provide appropriate information, wages between 6 July and 21 August and some outstanding holiday pay.

[4]It is the claimant’s contention that if there was no transfer then she is entitled to those sums from the first respondent and, given that it is in the process of voluntary liquidation, that those sums should be paid by the Insolvency Service. A request to the Insolvency Service was made, but the claim was rejected on the basis that the Insolvency Service considered that there had been a relevant TUPE transfer.

[5]When I saw the tribunal file it became clear to me that the first respondent had not been served with a notification of this hearing. Furthermore, I had reservations as to whether the second respondent had been properly served, given that whilst the notification was sent to its registered address, it was addressed to a firm of accountants (Adams Moore Ltd) who status in respect of these proceedings is unclear to me. It appears that they had been advising the directors of the first respondent prior to the liquidation commencing and there is some suggestion that they may have continue dot advise those directors, possibly also in their capacities as directors of the second respondent. However, there is nothing on the tribunal file to indicate that that is the case, albeit that the claimant’s solicitors were able to tell me of a conversation with the representative of the employment tribunal who had indicated to them that they believed that that firm was advising both the first and second respondents. No note or record of any such conversation appears on the tribunal file.

[6]Given that no notice had been served by the tribunal on the first respondent, whether by sending it to the liquidators (as ought to have been done) or otherwise, I could not give any judgment against that entity. I was also concerned that the second respondent might say that it had not properly been notified of this hearing.

[7]In these circumstances Mr Zaman took instructions and applied to have this matter adjourned so that proper service could be effected. I note that neither respondent has submitted an ET3, but both are entitled to notification of this hearing and to take such part in it as I, as the Judge, might allow (see Rule 21(3) of the Rules of Procedure).

[8]Upon enquiry it appeared that this case could be relisted before me on 7 November 2024 provided that the parties were content to have the hearing conducted via CVP. They were so content and the matter has been so listed.

[9]I direct that notification of that hearing should be sent to both the liquidators of the first respondent and to the second respondent at its registered address. In an abundance of caution I also order that the notice be served on Mr Martin Crook of Adams Moore Ltd. The relevant addresses are as follows:9.1 The first respondent at: The Creation Agency Ltd (in voluntary liquidation) c/o its liquidators 158 Edmund Street Birmingham West Midlands B3 2HB

9.2 The second respondent: Cleo Marketing Ltd 7 Victoria Road Tamworth Staffordshire B79 7HS

9.3 Martin Crook: Martin Crook Adams Moore Ltd 7 Victoria Road Tamworth Staffordshire B79 7HS

[10]Before todays hearing commenced I was provided with a witness statement from the claimant. Having discussed the matter with Mr Zaman it was agreed that a further witness statement (which would probably replace the present witness statement) should be prepared which would deal at least with the following matters:10.1 How many employees the first respondent had in the period immediately prior to the liquidation.

10.2 What discussions the claimant herself had (or was aware of) relating to the possible liquidation of the first respondent and her and others obtaining employment with the second respondent and when such conversations took place.

10.3 What, if anything, transferred between the first and second respondent, for example how many employees moved form one to the other, whether any contracts or customers moved from one to the other and whether any equipment moved from one to the other.

[11]I order that a copy of such a witness statement should be sent to all of those identified above no later than close of business on 31 October 2024 and that a copy of that statement in electronic form should be sent to the tribunal at the same time.

[12]I have prepared a detailed set of reasons so that they may be sent to all of those identified above so that they are clear as to why the hearing today has been adjourned and what matters a\re to be dealt with at the resumed hearing on 7 November. In short, that hearing will deal with liability for the claimant’s various claims against both respondents and the quantification of those claims. Employment Judge Andrew Clarke KC Date: …1 October 2024………….. ............................................................ Recording and Transcription Please note that if a Tribunal hearing has been recorded you may request a transcript of the recording, for which a charge may be payable. If a transcript is produced it will not include any oral judgment or reasons given at the hearing. The transcript will not be checked, approved or verified by a judge. There is more information in the joint Presidential Practice Direction on the Recording and Transcription of Hearings, and accompanying Guidance, which can be found here: https://www.judiciary.uk/guidance-and-resources/employment-rules-and-legislation-practicedirections/

[1]The background to this claim and the reasons for the hearing today are set out in my judgment with reasons sent to all parties on 1 October 2024.

[2]I am satisfied that the liquidators of the first respondent and the operating minds of the second respondent are aware of today’s hearing and have been provided with the witness statement of the claimant and the bundle of documents provided to me. They have chosen not to attend.

[3]An accountant said to represent the second respondent suggested to the tribunal that this claim duplicated one proceeding in the London East Tribunal. The documents provided by that accountant show that a Mrs Craddock commenced a claim against the second respondent in 2023. At a hearing in early 2024 it was suggested that she might have intended also to claim on behalf of others including the present claimant before me, being people listed in a schedule to her early conciliation notification. In fact, she had only claimed on her own behalf. The matter was then adjourned for her to consider her position and for a particularised ET3 to be served. The claimant had already commenced her claim here and I am satisfied that she knew nothing of Mrs Craddock’s claim or of Mrs Craddock adding her name to a list appended to her early conciliation notification. Nothing of the above provides any barrier to this claim proceeding today.

[4]I heard evidence from the claimant and I questioned her on various relevant matters. Having looked at the documents referred to in her witness statement and having considered her witness statement and her oral evidence I make the findings of fact set out below.

Findings of fact

[5]The claimant was employed by the first respondent as a Senior Digital Designer from 8 May 2017 to 6 July 2023. She was part of a design team which worked closely with a client facing team. Her team discussed ongoing work daily and the whole workforce of some 18 people met monthly.

[6]Her team was busy and, hence, the client facing team must have been busy. Comments made in the reports produced in the context of the voluntary liquidation of the first respondent suggest that the business had struggled through covid and thereafter lost clients and that the loss of another major client pushed the first respondent inevitably towards liquidation. The claimant does not recognise that picture of the company. She tells me, and I am satisfied, that the business continued during the covid period and that no staff were furloughed, although it does appear from the documentation I have seen that some kind of government loan was obtained in that period. I am satisfied that nothing that the claimant saw or heard during her employment to 6 July 2023 suggested that there were any problems with the first respondent’s business.

[7]On 6 July, out of the blue, she and other employees were told that they were being made redundant by the first respondent. However, she and the majority of those other employees were told that they would be offered employment on the same terms by the second respondent. The claimant was told that this employment would commence at the end of what would have been her notice period with the first respondent, payment in respect of which she would get by making a claim to the Insolvency Service. The expected date for the commencement of the liquidation of the first respondent changed over time and eventually she was given 21 August 2023 as her start date with the second respondent and she did then start employment.

[8]The claimant does not believe that the second respondent traded prior to 6 July 2023. Certainly, a list of employees on its new website appears to consist of former employees of the first respondent and a group of people who worked for a similarly named business in the USA and who were not on the UK payroll.

[9]Clients the claimant dealt with were told around 6 July that the first respondent was “rebranding” and it appears that this also may have encompassed the US operation. Thereafter, the business continued under the name of the second respondent.

[10]Whilst the employees of the first respondent (and the Insolvency Service) were told that those employees were redundant and that the first respondent was ceasing to trade, the reality was that (as the clients had been told) the business continued in the guise of the second respondent. The moving minds behind both businesses appear to be the same.

[11]The claimant, once she started work at the second respondent, dealt with the same clients as before and, where projects were ongoing, she did the same work on those same projects. Her email address changed to refer to the second respondent’s name but she used the same log in details to access the same files on the same software that she had used before. She used the same hardware working largely from home, as she had done before. I have seen a transcript of an exchange between the claimant and her Manager, Penny Abernethy, on 19 September 2023, when the claimant queried whether she should have acted in accordance with the letter sent to her in July. This had required her to deliver up all devices such as laptops. She was told that she should continue to use them as before (which she did) and that the letter had said this because it was a formality. No one, she was told, had done this, or was expected to do it, or needed to do it.

[12]In due course, the Insolvency Service rejected all claims to redundancy payments, wages for notice periods and unpaid holiday pay. It asserted that there had been a TUPE transfer. The claimant, and later her solicitors, were told that this was wrong by the operating minds of the second respondent and that this had resulted from incorrect information having been given to the Insolvency Service by employees of the first respondent. Requests to produce any explanation of why there was no transfer and to produce a copy of what was suggested to have been an appeal document lodged against that determination by the Insolvency Service have both been met with silence.

[13]The claimant has not been paid for the period from 3 July to 21 August 2023. That is a period of seven weeks and the net wages that she should have been paid for that period amount to £5,384.61.

[14]The claimant had untaken holiday entitlement of 2.5 days as of 6 July 2023 and accrued a further holiday entitlement of 4.5 days up to 21 August of that year. The total entitlement is seven days. The claimant has now left the employ of the second respondent which failed to pay her for those seven days of untaken holidays when she left. That amounts to £1,076.92 worth of untaken holidays.

[15]I am satisfied that the claimant’s annual wage at the first respondent is such that 13 weeks’ worth of wages would amount to £10,000.

The law

[16]The claimant makes claims against the second respondent for the matters dealt with below. For present purposes it is not necessary for me to outline or make any determination with respect to claims that she makes by way of alternative against the first respondent. There was originally a claim suggested in the claim form for a basic award consequent upon an automatic unfair dismissal alleged to have taken place on 6 July. It is accepted that such a claim could not be made against the second respondent as if the Transfer of Undertakings Regulations operated in this case her employment would have transferred rather than having been terminated.

[17]The claims she makes are as follows:17.1 A failure to inform and consult as required by the Transfer of Undertakings (Protection of Employment) regulations 2006;

17.2 A claim in respect of an unauthorised deduction from wages being the wages she ought to have been paid for the period 3 July to 21 August 2023;

17.3 A payment in respect of the holidays not taken as at the time of the termination of her employment with the second respondent.

[18]The first issue that I have to determine is, therefore, whether the second respondent is liable for these claims on the basis that there was a relevant transfer between the first and second respondents of an economic entity in the UK which retained its identity. Such an entity is an organised grouping of resources which has the objective of pursuing an economic activity.

[19]I do not propose to set out the law in this regard in any detail. I have had in mind the guidance in a long line of cases such as Cheesman v R Brewer Contracts Ltd

[2001] IRLR 144

. In deciding whether there was such an entity which retained its identity upon being transferred from the first to the second respondent I need to look carefully at the facts to see what happened to the employees, the assets (both physical and otherwise), and the clients of the first respondent and whether the second respondent carried out similar activities after the purported transfer. That the operation of the old business substantially continued using the same assets, a majority of the same employees, and servicing the same clients would on the authorities point to wards a TUPE transfer.

[20]The information and consultation provisions found in Regulation 13 of TUPE are complex, but in their application to this case, they are relatively straightforward. There is no recognised trade union here and there were no previously appointed or elected employee representatives. The number of employees in this case puts the case above the de minimis threshold in Regulation 13A, hence, provision should have been made for employee representatives to be elected and information should have been provided in the various categories set out in Regulation 13.

[21]There is a provision (Regulation 13(9)) which deals with cases where there are special circumstances justifying a failure to comply with the requirements of Regulation 13. Then the employer must “take all such steps towards performing” the Regulation 13 duties as are reasonably practicable in the circumstances. In the related context of s.188(7) of the Trade Union and labour Relations (Consolidation) Act, Clarks of Hove Ltd v Bakers’ Union

[1978] ICR 1076

determined that special circumstances means something which is “exceptional or out of the ordinary”. It is now trite law that the mere fact of an impeding insolvency is not of itself something which would amount necessarily to “special circumstances”, something more is required. It is obvious that the burden of establishing such circumstances showing what was done and why is on the respondent employer.

[22]Regulation 15(1) provides for who can make a claim for failing to inform and consult. Here, as there were no representatives and the claimant is clearly an “affected employee” she can make her own claim, as she has done.

[23]Where there is a failure to comply with the Regulation 13 obligations, an employment tribunal must so declare and may award compensation of up to 13 weeks’ pay. The weeks’ pay is there calculated in accordance with the provisions of sections 220 to 228 of the Employment Rights Act 1996. There is no statutory cap on a weeks’ pay for these purposes. The employment tribunal is not here to seek to compensate for financial losses. Rather, this is a provision designed to penalise transferees for their failure to comply. The tribunal must look at the nature and extent of the default (see Sweetin v Coral Racing

[2006] IRLR 252

). The tribunal must ask itself how grave is the default, whether it was deliberate or accidental and whether there are mitigating circumstances, which I accept may exist even where the special circumstances defence has failed.

[24]A failure to pay wages, or the difference between what should have been paid and what was paid, both amount to an unlawful deduction from wages under part II of the Employment Rights Act (see s.13(3)). A claim can be made to an employment tribunal for unpaid wages. The primary limitation period for such a claim is three months after the wage should have been paid. There is a secondary limitation period (see s.23(4)) which is available if it was not reasonably practicable to bring the claim in time.

[25]Ordinarily, employees have no entitlement to pay in respect of untaken leave. Such an entitlement does arise when employment terminates (see the Working Time Regulations 1998, Regulation 14). This claimant’s employment has terminated and her claim relates to such a period of untaken leave. Applying the law to the facts

[26]The first question I need to look at is whether there was a TUPE transfer. I am satisfied that there was. This was, as the clients of the first respondent were told, a rebranding exercise. In law, the entity (based in the UK) they were dealing with changed but it appears to me that little else did. The same employees continued to perform the same work on current (ie, partially completed at transfer) and new projects; new work continued to be sought by those who had previously sought it, both from the same client base and, doubtless, from new clients. It was performed by the same employees using the same hardware and software. The entity moved to the second respondent which, so far as possible, recreated the business of the first respondent under a new name.

[27]It follows that there should have been employee representatives elected and information should have been given and consultation should have taken place as required by Regulation 13. Some information was given, but only incidental to a pretence that the claimant was redundant and was being offered new employment by the second respondent. I consider that the exchange on 19 September to which I have referred and the letter to which that relates suggesting that all devices needed to be handed back to the first respondent, shows that the controlling minds of the first and second respondent (being identical people) were deliberately seeking to create a misleading picture. The intention appears to have been to seek to persuade the Insolvency Service that the first respondent’s business had ceased, when in fact it was continuing in the guise of the second respondent.

[28]I have no doubt that this subterfuge disturbed the claimant as she tells me that it did. She was led to believe that she would receive certain payments from the Insolvency Service to which she was in fact not entitled and the second respondent failed to pay her sums to which she was entitled. She was led to believe that she was starting new employment, when in fact her old employment continued with a new employer by operation of law.

[29]The respondents have not sought to suggest that there were special circumstances justifying non-compliance with the requirements of regulation 13. I do not know when the directors of the first respondent, who of course also directed the second respondent, first hatched the plan to move the business from one to the other. Such evidence as I have heard as to the state of the business of the first respondent suggests to me a lack of any great urgency in the project. Whether the aim of the exercise was to avoid liabilities is not for me to decide. I can see no reason why the information and consultation provisions could not have been fully and properly complied with.

[30]As expert insolvency advice was sought and obtained, letters written to employees to suggest that all equipment needed to be handed back when that was never the intention, and employees misled whilst clients were being told that this was just a rebranding, I conclude that the respondents both understood the likelihood that this was a TUPE transfer and deliberately chose, for their own reasons, to try to disguise this. In those circumstances I consider an award of 13 weeks’ pay, namely £10,000, to be appropriate in addition to making an appropriate declaration.

[31]The claimant should have been paid by the second respondent for the period 3 July to 21 August 2023. The claimant had become the second respondent’s employee on 6 July by operation of TUPE. The purported immediate dismissal on that date for redundancy by the first respondent was ineffective. That failure to pay is an unlawful deduction from wages in the sum of £5,384.61.

[32]Depending upon when parts of that sum ought ordinarily to have been paid as wages, it is possible that even with an extension by reason of early conciliation, part of the claim may have been presented outside the primary limitation period by a claim form presented on 30 November 2023. I did not hear any submissions on this. However, even were that the case, I would have found it to be not reasonably practicable to present a claim in that time as until shortly prior to making her claim, the claimant had no idea that she had such a claim against the second respondent, having been misled as to the existence of a TUPE transfer. She acted promptly once she understood what she now contends to be the true position.

[33]The claimant was due £1,076.92 in respect of untaken holidays at the termination of her employment with the second respondent., This sum was not paid. Hence, she is entitled to recover it. Employment Judge Andrew Clarke KC Date: 21/11/2024 N Gotecha Recording and Transcription Please note that if a Tribunal hearing has been recorded you may request a transcript of the recording, for which a charge may be payable. If a transcript is produced it will not include any oral judgment or reasons given at the hearing. The transcript will not be checked, approved or verified by a judge. There is more information in the joint Presidential Practice Direction on the Recording and Transcription of Hearings, and accompanying Guidance, which can be found here: https://www.judiciary.uk/guidance-and-resources/employment-rules-and-legislation-practicedirections/

The law

[1]The application to was made by a Mr Crook of Adams Moore Accountants and Business Advisers. Mr Crook stated that he was making the application at the request of the directors of both respondents.

[2]He asserted that the claim was covered under a group claim numbered 3200572/2024 in respect of which a full hearing had taken place. That claim is said to be “covered under the East London Office.” Mr Crook then asserted that the present claim (commenced in 2023) “should be cancelled”.

[3]I am satisfied, as I noted in paragraph 2 of the reasons sent to the parties on 14 December 2024, that the liquidators of the first respondent (who I believe to be Mr Crook’s firm) and the operating minds of the second respondent were aware of the hearing in November 2024 following which the December judgment was promulgated. They had been provided with the claimant’s witness statement and the bundle of documents used before the tribunal. Despite that they chose not to attend.

[4]In paragraph 3 of those reasons I dealt with the point now relied upon by Mr Crook. It is clear that the present proceedings pre-date the Craddock claim in the London East Tribunal. Furthermore, on the evidence before me in Case Number: 3313571/2023 November, I was satisfied that the claimant in these proceedings was unaware of the later East London proceedings. I note that Mr Crook does not suggest that Ms Brookman played any part in any hearing of that claim before the London East Tribunal.

[5]In those circumstances I am satisfied that there is no reasonable prospect of the judgment in the present claim being varied or revoked. Hence, I refuse the application for a reconsideration of that judgment. Approved by: