RCO SUPPORT SERVICES LIMITED v UNISON & ORS [2002] EWCA Civ 464

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT
APPEAL TRIBUNAL
[2002] EWCA Civ 464Case No Case No: A1/2000/2596Venue Royal Courts of Justice, Strand,, London, WC2A 2LL, Friday 12th April 2002
Between
RCO SUPPORT SERVICES LIMITEDAppellantUNISON & ORSRespondent
Before
Lord Justice PillLord Justice MummeryLady Justice HaleMr Nicholas Underhill QC and Mr Thomas Linden (instructed by Eversheds for the Appellant)Mr Brian Langstaff QC and Miss Dinah Rose (instructed by Thompsons for the Respondent Unison)Mr Gerard McDermott QC, Mr Conor Quigley and Miss Joanne Connolly (instructed by the Legal Department of Rentokil Initial UK Limited for the Respondent Initial Hospital Services).Date 12 April 2002

Lord Justice Mummery :

This

[1]is an appeal from the order of the Employment Appeal Tribunal on 4 July 2000 dismissing the appeal of RCO Support Services Limited (RCO) from the decision of the Employment Tribunal sitting at Liverpool. The judgment given on behalf of the Appeal Tribunal by its President, Lindsay J, is reported at [2000] ICR 1502.[2]On a preliminary issue arising in proceedings by former employees (cleaning and catering staff) for unfair dismissal and by the cleaners' union, Unison, for breach of consultation obligations, the Employment Tribunal held, in Extended Reasons sent to the parties on 2 November 1998, that there were transfers of undertakings, within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 1981, as amended, (TUPE), for the supply of cleaning and catering services at Walton Hospital. The transferee was RCO, which operated a contract for the supply of cleaning and catering services at the near-by Fazakerley Hospital. Both hospitals, only three miles apart in Liverpool, are administered by the respondent Aintree Hospitals NHS Trust (the Trust), which was not represented on the hearing of the appeal.[3]On 31 March 1998 the process of moving in-patient services from Walton Hospital to Fazakerley Hospital was completed. Walton Hospital was left with only an out-patients service. This dispute is concerned with the impact of the closure of in-patient services at Walton and the transfer of them to Fazakerley on the employment rights of the ancillary cleaning and the catering staff formerly employed to supply support services at Walton. Cleaners[4]From 1972 the cleaning work at Walton Hospital was contracted out, first to Taylorplan and then from October 1995 to the respondent, Initial Hospital Services Limited (Initial). The cleaners employed by Initial were permanently dedicated members of the in-patients' cleaning team, mainly working in particular wards or theatres for 4 years or more. They were known as "ward girls" or "theatre girls" and were regarded as part of the team serving the ward or theatre. They needed a certain amount of training and operated established systems with the medical staff.[5]Phase 1 of the closure of in-patient services at Walton began on 29 March 1994 with the closure of the Accident and Emergency Department. In 1996 Wards E and F at Walton were closed. They were directly replaced by two new wards at Fazakerley, using the same medical and nursing staff serving the same patients. The same 6 cleaners moved to Fazakerley with the rest of the ward. RCO had the cleaning contract at Fazakerley. It disputed the contention of Unison that the cleaners were protected by TUPE, but accepted, without abandoning its contention, that the 6 cleaners should have continuity of employment. Phase 1 was completed by the transfer of the opthamology ward and the main operating theatres.[6]On 19 November 1997 there was a meeting between RCO and Unison. There was a discussion about the future of 25 cleaners and 3 supervisors employed by Initial, whose functions were moving to Fazakerley. RCO denied Unison's contention that their employment would transfer pursuant to TUPE, but said that they "would be taken on if they resigned from Initial." No agreement was reached. Further meetings failed to resolve the disagreement. RCO successfully tendered against Initial for the cleaning contract at Fazakerley on the footing that TUPE did not apply. When RCO advertised the resultant vacancies none of the Walton cleaners applied for jobs with RCO. None of them were taken on by RCO. The tribunal expressly found that there was "no dishonourable reason" for RCO's preference.[7]On 31 March 1998 Phase 2 of the process of transfer was completed. The new building at Fazakerley was ready. The doctors and nurses serving particular wards were transferred to equivalent wards at Fazakerley along with medical equipment, furniture and beds. The operating theatres at Walton were closed and were replaced by the same number for the same work at Fazakerley. There was a ward-for-ward, theatre-for-theatre equivalence in the arrangements at the 2 hospitals. Though the area to be cleaned was smaller at Fazakerley, it had to be carried out in accordance with the same work standards, procedure codes and monitoring issued by the Trust. The cleaners' employment at Walton ended on 31 March 1998. Catering[8]The catering staff at Walton was employed by the Trust. There were 6 chefs and a larger number of catering support staff (room supervisors, cashiers, assistants and porters) supplying a complete catering service for patients and staff. Individual members of the catering staff team had designated roles with allotted work in the kitchen or the dining room. There was, of course, flexibility and cover for absences within a team.[9]At Fazakerley, where RCO had the catering contract and employed the same categories of catering support staff to fulfil the same functions, the staff restaurant was replaced by a new catering facility in February 1998, but the kitchen remained operative. The 6 chefs at Walton were moved to Fazakerley, but remained employees of the Trust. 6 support staff were re-deployed within the Trust and 3 were made redundant. RCO invited applications from them. One of them was taken on. Another employee at Walton was taken on by RCO later. Some catering equipment (slicing machine, service trolleys) was moved from Walton to Fazakerley. The Employment Tribunal[10]Having made the important findings of fact summarised above the Employment Tribunal directed itself as follows- " 5(a) A transfer of an undertaking attracts for employees the protection of [TUPE] when the ownership of an economic entity changes while it retains its identity. When a part of a business is detached, it is an economic entity within the scope of [TUPE] if it is a unit with organisational independence."[11]The Employment Tribunal then asked and answered the first question-Was there an undertaking?- in a manner which RCO does not appeal- "5 (b) Was there in either of these cases an economic entity? There was in each: the cleaning services for in-patients at Walton Hospital; the catering support for in-patients there. Particular people did particular jobs in particular places for particular people: all the work in either group was homogeneous, belonging in the same category; the employees cleaned and they did the jobs ancillary to serving the food prepared by chefs; each was a group with its own identity; each was staffed by people dedicated to particular tasks "[12]The Employment Tribunal then moved to the second question-Was there a transfer?- "6. Was there a change of ownership or merely a closure of Walton with a dissipation of the work elsewhere? Did either unit retain its identity? In other words was there a transfer of either economic entity? There was a transfer of each."[13]In its reasoning the Employment Tribunal expressly considered the judgment of the European Court of Justice in Suzen [1997] ICR 662, which is heavily relied on by RCO, and commented that " On the face of it, this means that where there is no transfer of assets, if the second contractor does not in fact become the employer of the original contractor's workers, there is no transfer. Thus a new owner might defeat the operation of [TUPE] simply by refusing to take on the old workforce. On that understanding of Suzen, the finding would irresistibly go against these applicants."[14]After considering the purpose of TUPE and the parent Acquired Rights Directive 77/187/EEC, and the decision of the Employment Appeal Tribunal in ECM(Vehicle Delivery Service) Limited v. Cox [1998] ICR 631, EAT (which was later upheld by the Court of Appeal: [1999] ICR 1162 ) the tribunal considered all the circumstances of the case and found as a fact that the economic entities, which existed at Walton in respect of the support cleaning and catering services, retained their identity in the new location at Fazakerley operated by RCO. The tribunal justified its conclusion on the cleaners (domestics) as follows- "6 (d) The core business of the domestics moved to Fazakerley, ward for ward, theatre for theatre. The ancillary demand, the cleaning of corridors, remained, though the corridors changed; likewise the cleaning of offices. It was no more than a change of location for the same business carried on by a different firm. Here was a labour intensive business: the transfer of tangible assets was of little significance, for there was not much that might be transferred. On a strict definition, the nature of the business meant that there were no significant intangible assets, such as goodwill or unpaid fees; the Trust provide a free public service, without rival, to the greater part of the community. The need for the cleaners' labours were substantially maintained. To the extent that these cleaners were trained to do a special kind of cleaning, the need for their particular skill travelled from Walton to Fazakerley. The areas they cleaned served those people who had previously gone to Walton for their medical needs: the customers remained the same, whether in the technical sense in which the Trust was the customer or the looser sense in which the community's sick and pregnant were. Wards and theatres that corresponded with those in Walton needed to be cleaned, with the corridors providing access to them: the same categories of ailment and need were provided for after the change, just as they had before it. A patient coming to Fazakerley after the change, having earlier been treated at Walton, would have been admitted to the ward for the same speciality, perhaps lain in the same bed, cared for by the same nurses, treated by the same doctors, operated on in a similarly dedicated theatre, as at Walton. There was the same need for cleaning, some of it rather specialised, as before."[15]Similar reasoning was applied in paragraph 6(g) and (h) of the Extended Reasons to the position of the catering staff, save that it was not a case of one contractor losing a contract to another: the Trust, as the original employer, shed one of its activities, that of working the kitchen and dining room. There was also some transfer of assets. It was held that the service at Walton did not change its identity and that there was a transfer. Employment Appeal Tribunal[16]RCO's appeal was dismissed following an in-depth review of the authorities by the Appeal Tribunal, which rejected the contention that the Employment Tribunal had misdirected itself in law by merely looking to see if a given activity continued in order to find whether there was either an undertaking or its transfer. The Employment Tribunal had also looked to the training, system or organisation that lay behind the activity. Its factual appraisal of all the circumstances concluded that the economic entities as to both cleaners and caterers retained their identity and that they were transferred. The Appeal Tribunal concluded that they could not say " with any confidence that the Tribunal erred in law," adding this comment in paragraph 29 " We are not sorry so to conclude. There is a real danger, were Suzen given the unqualified force that has been argued for it, that in labour-intensive areas of employment such as cleaning and catering where contracting out is now common and where significant assets are often either unnecessary or unlikely to be moved, an incoming contractor would be able to avoid the Directive by the simple expedient, often easy of achievement, of ensuring that he took on none of the previous contractor's workforce. The protection of employees' acquired rights, a basic object of the Directive, would not only be jeopardised but, as Miss Gower for the former employees, asserts, would be jeopardised in relation to perhaps the most vulnerable of all classes of workers, those with only relatively simple and commonly available skills which, on that account, the incoming contractor could readily choose to supply by way of others in the labour market." Grounds of Appeal[17]The court has had the benefit of excellent arguments from each side focusing on two aspects of the tribunal's decision. The jurisdiction of this court to entertain appeals from the decisions of Employment Tribunals is, of course, limited to questions of law. Sacrificing some accuracy for the sake of simplicity it is possible to identify the two principal areas of debate as the Suzen point and the ECM point. The Suzen Point: RCO's Submissions[18]In Suzen the Court of Justice delivered the following ruling in paragraph 23 of its judgment on the interpretation of article 1 (1) of the Directive:
" [I]t is to be interpreted as meaning that the Directive does not apply to a situation in which a person had entrusted the cleaning of his premises to a first undertaking, terminates his contract with the latter and, for the performance of similar work, enters into a new contract with a second undertaking, if there is no concomitant transfer from one undertaking to the other of significant tangible or intangible assets or taking over by the new employer of a major part of the workforce, in terms of their number and skills, assigned by his predecessor to the performance of the contract."
[19]RCO submitted that the ruling authoritatively clarified the interpretation of the Directive by significantly retreating from the "activities test" in Schmidt and by setting irreducible minimum requirements for a transfer on a clear and logical conceptual basis so as to conclude this case in its favour. The Trust had entrusted the cleaning of Walton Hospital to Initial. That contract was terminated on the closures of in-patient care at that hospital. A new contract for the performance of that work was entered into by the Trust with RCO at Fazakerley Hospital. None of Initial's workforce was taken over by RCO from Initial. There was no transfer of significant assets to RCO. So the Directive does not apply to this case. The Employment Tribunal erred in failing to apply the ruling in Suzen and in holding that TUPE applied.[20]RCO developed its arguments by relying on earlier passages in the judgment in Suzen and by citing later judgments in which the Court of Justice has repeated the interpretative ruling given in Suzen . Reference was also made to the illuminating writings of Professor Paul Davies on the background to the decision in Suzen and generally on the chequered judicial history of the Directive and TUPE: see his chapter in Sciarra Labour Law in the Courts: National Judges and the European Court of Justice pp. 131-144.[21]It was emphasised that the essential point in Suzen is this: contrary to what may have been the understanding of earlier decisions of the Court of Justice on contracting out, the mere fact that the service provided by the old and new awardees of a contract is the same or similar does not support the conclusion that an economic entity has been transferred. RCO cited, in particular, the following paragraphs from the judgment in Suzen :
"15 .An entity cannot be reduced to the activity entrusted to it. Its identity also emerges from other factors, such as its workforce; its management staff; the way in which its work is organised; its operating methods, or, indeed, where appropriate, the operational resources available to it. 16. The mere loss of a service contract to a competitor cannot by itself indicate the existence of a transfer within the meaning of the Directive In those circumstances, the service undertaking previously entrusted with the contract does not, on losing a customer, thereby cease fully to exist, and a business or part of a business belonging to it cannot be considered to have been transferred to the new awardee of the contract. 17 . [A]lthough the transfer of assets is one of the criteria to be taken into account by the national court in deciding whether an undertaking has in fact been transferred, the absence of such assets does not necessarily preclude the existence of such a transfer: Schmidt 18. .[T]he national court, in assessing the facts characterising the transaction in question must take into account among other things the type of undertaking or business concerned. It follows that the degree of importance to be attached to each criterion for determining whether or not there has been a transfer within the meaning of the Directive will necessarily vary according to the activity carried on, or indeed the production or operating methods employed in the relevant undertaking, business or part of a business. Where in particular an economic activity is able, in certain sectors, to function without any significant tangible or intangible assets, the maintenance of its identity following the transaction affecting it cannot, logically, depend on the transfer of assets. 19. 20. [I]t should be borne in mind that the factual circumstances to be taken into account in determining whether the conditions for a transfer are met include in particular in addition to the degree of similarity of the activity carried on before and after the transfer and the type of undertaking or business concerned, the question whether or not the majority of the employees were taken over by the new employer.. 21. Since in certain labour-intensive sectors a group of workers engaged in a joint activity on a permanent basis may constitute an economic entity, it must be recognised that such an entity is capable of maintaining its identity after it has been transferred where the new employer does not merely maintain the activity in question but also takes over a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessor to that task. In those circumstances the new employer takes over a body of assets enabling him to carry on the activities or certain activities of the transferor undertaking on a regular basis."
[22]Later judgments of the Court of Justice repeat the ruling in Suzen on the issue of a transfer in labour-intensive contracting out cases in preference to the earlier approach to contracting out of services indicated in Schmidt v. Sparkasse [1995] ICR 237 , though without expressly overruling that case. See Francisco Hernandez Vidal SA [1999] IRLR 132; Sanchez Hidalgo [1999] IRLR 136; Allen v. Amalgamated Construction Co Ltd [2000] ICR 436; and Mayeur v. Association Promotion de l'Information Messine (APM) [2000] IRLR 783. In Oy Liikenne AB [2002] ICR 155 , a more recent case in the Court of Justice, it was stated in the Opinion of the Advocate General (paragraphs 50-52) that the case law establishes that, in order to demonstrate a transfer, not only the same economic activity must be carried on before as after the putative transfer ("identity of the activity"), but also "there must have been the transfer of the means necessary to undertake the activity in question, or of the means required to operate it, having regard to the nature of the entity transferred" ("identity of the entity"). In that case there was no transfer of tangible assets from the former operator to the new operator of bus lines. The majority of the bus drivers were, however, taken on by the new operator. The ruling of the Court of Justice was that the Directive did not apply, there being no retention of the identity of the entity in the absence of a transfer of the assets.[23]Finally, it was argued that tensions apparent in the post- Suzen Court of Appeal authorities - Betts & Ors v. Brintel Helicopters Limited [1997] ICR 792 ; ECM (Vehicle Delivery Service) Limited v. Cox (supra); and ADI (UK) Limited v. Willer [2001] IRLR 542 ( ADI )-should be resolved in favour of recognition of the shift of emphasis in Suzen away from the decision in Schmidt v. Sparkasse [1995] ICR 237 , as noted in Betts and accepted in ADI. The Suzen Point:Conclusion[24]I agree that it has become clear from Suzen and later judgments that the Court of Justice now interprets the Directive as setting limits to its application in contracting out cases, which were not expressly identified in Spijkers [1986] ECR 1119 , or in Schmidt and other earlier judgments of the Court of Justice. In particular, the mere fact that the putative transferee carries on the same activities or supplies the same services as the putative transferor had done does not by itself support the conclusion that an entity retains its identity. It is not correct to treat that single circumstance as determinative in favour of a transfer. Indeed, there may be no scope for the application of the Directive in a case where, although the same labour-intensive activities are continued or the same services are supplied by a new contractor, none of the workforce has been taken on.[25]I am, however, unable to accept RCO's submissions that the limits on the application of the Directive set in Suzen mean that, as a matter of Community law, there can never be a transfer of an undertaking in a contracting out case if neither assets nor workforce are transferred; that the only legally permissible conclusion on the facts of this case was that, as none of the workforce were taken on by RCO, no transfer could have taken place; and that the Employment Tribunal must have erred in law in concluding that there were in fact transfers within the meaning of TUPE.[26]I do not read Suzen as singling out, to the exclusion of all other circumstances, the particular circumstance of none of the workforce being taken on and treating that as determinative of the transfer issue in every case. That interpretation of the Directive would run counter to what is described in RCO's submissions as the "multifactorial approach" to the retention of identity test in Spijkers. Whether or not the majority of employees are taken on by the new employer is only one of all the facts, which must be considered by the national court in making an overall assessment of the facts characterising the transaction. Single factors must not be considered in isolation. As the Court of Justice held in the key passages of its judgment in Spijkers [1986] ECR 1119 at 1128-"11. [T]he decisive criterion for establishing whether there is transfer for the purposes of the directive is whether the business in question retains its identity.12. Consequently, a transfer of an undertaking, business or part of a business does not occur merely because its assets are disposed of. Instead it is necessary to consider, in a case such as the present, whether the business was disposed of as a going concern, as would be indicated, inter alia , by the fact that its operation was actually continued or resumed by the new employer, with the same or similar activities.13. In order to determine whether those conditions are met, it is necessary to consider all the facts characterising the transaction in question, including the type of undertaking or business, whether or not the business's tangible assets, such as buildings or moveable property, are transferred, the value of its intangible assets at the time of the transfer, whether or not the majority of its employees are taken over by the new employer, whether or not its customers are transferred and the degree of similarity between the activities carried on before and after the transfer and the period, if any, for which those activities were suspended. It should be noted, however, that all those circumstances are merely single factors in the overall assessment which must be made and cannot therefore be considered in isolation. 14.It is for the national court to make the necessary factual appraisal, in the light of the criteria for interpretation set out above, in order to establish whether or not there is a transfer in the sense indicated above."[27]There was no misdirection or misapplication of law by the Employment Tribunal. Spijkers is still good law. The Employment Tribunal followed the Spijkers approach; it applied the Spijkers retention of identity test; and it properly addressed the limits to the application of the Directive now set in Suzen in contracting out cases. Putting on one side the ECM point, which is dealt with separately below, the Employment Tribunal was entitled to characterise the facts found by it as involving retention of the identity of the economic entities of cleaning and catering previously carried on at Walton Hospital. The finding of a retention of identity was based on more than just a comparison of the similarity in the activities undertaken by the contractors before and after the move. It was reached by a consideration of all the circumstances. There was significantly more to this case than Initial losing a contract and RCO winning a contract covering the same activities in a different location. The entities at Walton described in the Extended Reasons had a discrete organisation for the exercise of special and important support skills, including established operating methods and training, and they were an integral part of the distinctive in-patients infrastructure, which was replicated in the framework at Fazakerley on the removal of the in-patients' services from Walton. The ECM Point: The Authorities[28]This point originates in a passage in the judgment given on behalf of the Appeal Tribunal by Morison J in ECM [1998] ICR 631 at 639E-H:
"In this case, on the tribunal's findings, the transferee did not take on the men precisely because they were asserting that the Regulations of 1981 applied and were threatening proceedings on that basis. The question arises, therefore, whether it is possible for a transferee to cause the Regulations to be disapplied by refusing to take on the workforce. Another way of putting the point is that if the taking on or not of the workforce controls the application or otherwise of the Regulations, then the question at issue is circular. The issue as to whether employees should have been taken on cannot be determined by asking whether they were taken on. It seems to us that we should adopt a purposive approach to the interpretation of the Regulations so as to give effect to the Government's obligations thereunder. We cannot and do not accept that it would be proper for a transferee to be able to control the extent of his obligations by refusing to comply with them in the first place. There is nothing in the Suzen decision which requires us to adopt that course."
[29]On the unsuccessful appeal to this court I stated in my judgment [1999] ICR 1162 at p. 1169E-F that "The [employment] tribunal was entitled to have regard, as a relevant circumstance, to the reason why those employees were not appointed by ECM. The Court of Justice has not decided in Suzen or in any other case that this is an irrelevant circumstance or that the failure of the transferee to appoint any of the former employees of the transferor points conclusively against a transfer."[30]RCO submitted that those passages in ECM were contrary to Suzen, as the Court of Justice had ruled that there was no transfer if none of the workforce of the first contractor was taken on by the second contractor. A similar comment was made on the judgments of the majority in ADI, in which May LJ stated that, although none of the existing work force was taken on by the putative transferee, there would be a transfer in that case if the reason or principal reason for not taking on the employees was in order to avoid the application of the Regulations ( paragraph 37); and Dyson LJ stated the mere fact that none of the labour force was taken on was not determinative of the case and that, if the reason why the employees were not taken on was in order to avoid the application of the Regulations, that would suggest very strongly that there was a transfer of an undertaking in that case (paragraph 59). It was submitted that, as stated by Simon Brown LJ in his dissenting judgment in ADI, the all-important fact in that case was that the putative transferee did not take on any of the workforce and that the reason for that is immaterial (paragraph 83). To adopt the approach of May LJ involved treating an undertaking as transferred when in fact it has not been (paragraph 81). ECM Point:Conclusions[31]The Employment Tribunal did not, of course, have the benefit of the judgments of this court in ADI. Its decision is, however, consistent with the view of the majority in ADI that Suzen does not require the national court to exclude from its consideration of all the facts characterising the transaction the circumstances of the decision by the putative transferee not to take on the workforce.[32]There is a crucial disagreement on the legal consequences of such a decision. In reliance on Suzen RCO asserts that the fact that none of the workforce was taken on by it is conclusive against a transfer. For reasons already explained I do not regard that submission of law as well founded. The fact that none of the workforce is taken on is relevant to, but not necessarily conclusive of, the issue of retention of identity. As it is a relevant factor, it is necessary for the Employment Tribunal to assess its significance by considering the context in which the decision was made. In the present case RCO positively said, in the context of a disagreement as to whether TUPE applied, that it would take on the cleaners employed by Initial at Walton, if they resigned from Initial (paragraphs 4 (e) and 6 (a) – (c) of the Extended Reasons). There was no error of law by the Employment Tribunal in taking this fact into account, in addition to the other facts referred to in the Extended Reasons and summarised in this judgment. RCO's admitted willingness to take on the workforce by way of re-employment on its terms and conditions, in preference to automatic employment on the terms and conditions applicable as a result of a transfer under TUPE, was relevant to the crucial issue of retention of identity. The fact that RCO needed a workforce to operate the contract at Fazakerley; the fact that RCO was willing to re-employ at Fazakerley the workforce employed at Walton; and the fact that the workforce would have been taken on by RCO, if they had accepted RCO's offer to re-employ them on its terms and conditions: all this is relevant evidence pointing to, rather than away from, RCO's own recognition of the reality of the continuity of the entities and the retention of identity. (I note in passing that in Schmidt (supra) the putative transferee's offer to re-engage the employee in question was treated as a fact relevant to the issue whether the business in question retains its identity: see paragraph 17 of the judgment on p. 247, which refers to Spijkers.)[33]The formulations of the rival arguments on the so-called ECM point revealed that there is a problem in identifying precisely the nature and scope of the point. There was a dispute as to whether the point had been taken in the tribunal in the sense of "actual motive" on the part of RCO to avoid the operation of the Directive and of TUPE and whether the tribunal had made any finding of fact on that point.[34]In the Respondents' submissions it was argued that it would be contrary to the principal purpose of the Directive to adopt a construction of it which would enable an incoming contractor to avoid its application by the simple expedient of ensuring that he took on none of the previous contractor's workforce or to control the extent of his legal obligations by refusing to comply with them in the first place. The court ought to approach the facts as if the cleaners had been transferred.[35]In RCO's submissions the ECM point was treated as a matter of subjective motive of the putative transferee, which was condemned as obviously irrelevant, patently circular and plainly proving too much: the putative transferee has no obligations, unless there is a transfer and, as Suzen makes clear, a transfer cannot take place unless either assets or the workforce transfer. In a labour-intensive case the employees are the undertaking and the undertaking cannot be said to have transferred, if they have not. The putative transferee, who does not receive the benefit of the employees, should not be saddled with the burden of the employment liabilities. The Respondents were, for policy reasons, relying on circumstances in which there was no transfer to establish that there was a deemed transfer. There was no support for that approach in the Directive or in the decisions of the Court of Justice.[36]As appears from paragraph 30 above, I have reached the conclusion that, as I attempted to indicate in ECM, this is not in truth a separate point. I am inclined to accept the submissions of RCO that a subjective motive of the putative transferee to avoid the application of the Directive and TUPE is not the real point. The relevant exercise is that in Spijkers i.e. objective consideration and assessment of all the facts, including the circumstances of the decision not to take on the workforce. In this case the Employment Tribunal was entitled to take into account the willingness of RCO to employ the Walton workforce at Fazakerley, if they first resigned and then accepted the offer of employment on its terms and conditions, as a factor supporting the retention of the identity of the cleaning and catering undertakings. Result[37]I would dismiss the appeal.

Lady Justice Hale – I agree

Lord Justice Pill – I also agree.

Order

Appeal dismissed. The 1 st and 4 th respondents' costs of the appeal to be paid by the appellant. Application for permission to appeal to the House of Lords refused. (Order does not form part of the approved judgment)

Cited in 19 later judgments

and 10 more of the most senior