Bower v Stevens & Anor [2004] EWCA Civ 496

Case No A1/2003/1706[2004] EWCA Civ 496
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
Venue Royal Courts of JusticeDate Tuesday, 6th April 2004
Strand
London, WC2
B E F O R E:
LORD JUSTICE POTTER
LORD JUSTICE LONGMORE
LORD JUSTICE MAURICE KAY
Between
MR M BOWERAppellant-v-
Between
MRS C STEVENSRespondentMR RT MARCRespondent
(Computer-Aided Transcript of the Stenograph Notes ofSmith Bernal Wordwave Limited190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
MR D BROATCH appeared for AppellantMR O SEGAL (instructed by Brachers) appeared for First Respondent for The Second Respondent did not attend and was not represented
J U D G M E N TTuesday, 6th April 2004

LORD JUSTICE POTTER: Maurice Kay LJ will give the first judgment.

LORD JUSTICE MAURICE KAY: This case arises out of the final days and weeks of Hughes Hooker, a firm of solicitors that once practised in the City. Mrs Carol Stevens commenced employment with the firm as an office junior in 1971 and later rose to more senior duties. Mr Richard Marc arrived in 1974 to work as a Conveyancing and Probate Clerk but also turned his hand to some litigation. Over the years, the firm went through various changes of name as a result of amalgamations and the comings and goings of partners. In 1985, Mr Jack Bielecki, who had recently been admitted as a solicitor, joined the firm as a partner, and within a short time he became the driving force. By late 1993 he was sole principal. In May 1995 he was joined by Mr Michael Bower who was employed at first as an assistant solicitor.

[3]Both before and after the arrival of Mr Bower, the firm and particularly, Mr Bielecki, attracted a degree of notoriety. As the Employment Tribunal was later to put it, he (that is Mr Bielecki):
" ... experienced certain brushes with the regulatory legal establishment which were to characterise his career throughout."
[4]Over the years, he was the subject of more than one individual voluntary arrangement, and he was on the receiving end of professional disciplinary measures including suspensions. To quote the Employment Tribunal again, he was:
" ... a man well practised in flaunting the norms of professional business and personal integrity in the pursuit of financial gain."
[5]This was common knowledge amongst those who worked with and for him.[6]The later history of Hughes Hooker saw a number of changes. By a partnership deed dated 24th September 1997, the firm comprised Mr Bielecki, Mr Bower and Ms Kirsty Scott, the latter two of whom were described as "salaried partners". Ms Scott retired from the partnership on 19th June 1998.[7]During part of 1999 and early 2000, Mr Bielecki was first suspended and then subjected to conditions by the Law Society. For some of that time at least, Mr Bower was sole principal.[8]In December 1999, a new partnership deed was executed by Mr Bielecki, Mr Bower and a Mr Duncan Francis. Its terms ensured that Mr Bielecki was able to exert effective control. Because he did not emerge from Law Society restrictions until May 2000, it was only then that the deed officially took effect. In July 2000, Mr Bower was aggrieved by the non-payment of his salary and other matters, and he attempted to resign, but in the end he did not. However, Mr Francis did retire from the firm on 31st January 2001.[9]By that time, the firm was in a sorry state. Mr Bower's arrears of salary were mounting. The office relocated to Manningtree in Essex, to where Mrs Stevens and Mr Marc were sent. Mr Bower began to work from home in South West London. There were further problems involving Mr Bielecki and the Law Society, and his personal tax affairs were in disarray, the Inland Revenue having presented a bankruptcy petition against him.[10]On 1st December 2000, the partners came to the view that the firm would have to be dissolved, but it seems that the Office for the Supervision of Solicitors then decided that Mr Bielecki should be given a further three months to find another partner. With evident and understandable reluctance, Mr Bower agreed to stay. He expressed profound misgivings but nevertheless consented to remain as a partner until 31st March 2001.[11]The next significant event was on 6th March 2001 when Mr Bielecki was struck off the roll of solicitors. Two days later, he and Mr Bower decided that the firm would close down on 30th March. The staff were so informed. Mr Bower and Mrs Stevens took the necessary steps to bring the practice to an orderly conclusion, he attending to matters requiring the authority of a partner, she dealing with correspondence and the like. Indeed, although 30th March remained the date of closure, they continued to attend to consequential matters for some time after that.[12]So much for the factual background. In due course, Mrs Stevens and Mr Marc commenced proceedings in the Employment Tribunal claiming breach of contract; unauthorised deduction from wages; wrongful dismissal; unfair dismissal; and redundancy payments. They named Hughes Hooker, Mr Bielecki and Mr Bower as respondents. Mr Bielecki did not actively participate in the proceedings. I understand that he has been in and out of bankruptcy at various points during this period of time.[13]The applications were heard in the Employment Tribunal over two days in March and May 2002, and the members of the Tribunal met to discuss the case on 13th June. The decision of the Employment Tribunal was promulgated on 22nd August 2002. That decision was that Mrs Stevens and Mr Marc had been dismissed by Mr Bielecki and Mr Bower as the partners in Hughes Hooker by notice given on 8th March 2001 and expiring on 30th March 2001. The issue of remedies was adjourned but, we were told in the course of the hearing, was subsequently resolved as a later hearing.[14]The reasoning of the Employment Tribunal is apparent from these passages in their decision. First, in paragraphs 78 and 79, it said:
" ... we draw the distinction between the legal status of the firm for different purposes. The status we are concerned with is Hughes Hooker as employer. That may not be the same as the status of Hughes Hooker as a solicitors practice for other purposes such as professional regulation, its relationship with clients and liabilities under the various tax regimes to which it was subject. "
In this case, to determine the limited questions carefully defined for us by the parties concerning the applicants' employment rights, it seems to us irrefutable on our findings of fact that Mr Bielecki and Mr Bower were both partners in Hughes Hooker up to 6 March 2001. Is that conclusion in respect of 6 March 2001 different for 8 March 2001 (or indeed for 30 March)? In other words, is it affected by Mr Bielecki being struck off on the former date? We think not. True, from 6 March 2001 Mr Bielecki could no longer practice as a solicitor and, subject to the Solicitors Disciplinary Tribunal suspending its order, which it expressly declined to do, any firm purporting to carry on business as a solicitors practice with Mr Bielecki a partner therein after that date would be prima facie doing so unlawfully and in all probability automatically dissolved by operation of law. We do not have to determine whether that happened in this case ... because we are satisfied as a fact that Mr Bielecki remained a partner in Hughes Hooker for the purposes of identifying the employer of the applicants who gave the notice of termination on 8 March 2001 to close on 30 March 2001. This is notwithstanding that, as a solicitors practice after Mr Bielecki's striking off, Mr Bower reverted to sole principal."[15]Then a little later, at paragraph 81:
"... at all material times, Mrs Stevens and Mr Marc were employed by Hughes Hooker in whom, qua employer, Mr Bower and Mr Bielecki were both partners and jointly and severally liable for their dismissal."
[16]Mr Bower then appealed to the Employment Appeal Tribunal. His appeal was dismissed. However, the Employment Appeal Tribunal, having received somewhat different legal submissions, analysed the case in a different way. It concluded that the partnership between Mr Bielecki and Mr Bower had been dissolved by operation of law on 6th March when Mr Bielecki was struck off. This followed from section 34 of the Partnership Act 1890 which provides:
"A partnership is in every case dissolved by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the members of the firm to carry it on in partnership."
[17]The notion that they remained partners as employers but not as solicitors until 30th March was not accepted by the Employment Appeal Tribunal.[18]The debate in the Employment Appeal Tribunal was whether, following dissolution on 6th March and the further employment of Mrs Stevens and Mr Marc by Mr Bower until 30th March, that employment achieved continuity from the previous employment by the partnership so as to preserve the employees' accrued rights or whether, as was submitted on behalf of Mr Bower, it was employment under new contracts without that effect. This required consideration of section 218(5) of the Employment Rights Act 1996. Section 218(5) is in these terms:
"If there is a change in the partners, personal representatives or trustees who employ any person - "(a) the employee's period of employment at the time of the change counts as a period of employment with the partners, personal representatives or trustees after the change, and "(b) the change does not break the continuity of the period of employment."
[19]It was common ground that where, following the dissolution of a partnership, a business is then carried on by two or more of the partners, even if only one surviving and one new partner, continuity of employment is preserved by section 218(5). The case for Mr Bower was that where, following a dissolution, a business is carried on by one surviving partner as sole principal, section 218(5) does not have that affect.[20]The Employment Appeal Tribunal concluded that section 218(5) is wide enough to ensure continuity in those circumstances. It described the rationale of section 218(5) as being:
" ... to preserve continuity of employment where the membership of a partnership changes."
[21]It continued:
"We do not think that Parliament intended that the consequence of partnership changes should be any different if a partnership of two persons becomes a sole proprietorship, simply because one of the two partners left."
[22]The Employment Appeal Tribunal granted permission to appeal to this court on the issue of section 218(5).[23]The skeleton argument submitted on behalf of Mr Bower contends that that interpretation of section 218(5) is "strained and impossible".[24]This was not the first occasion on which the Employment Appeal Tribunal has had to deal with this type of problem. In Harold Fielding Ltd v Mansi [1974] ICR 347, the relevant statutory provision was paragraph 9 of schedule 1 to the Contracts of Employment Act 1972, which was in substantially the same terms as section 218(5) of the 1996 Act. Addressing the situation in which an employee had been employed by two partners and later by one of them, Sir John Donaldson, as President of the National Industrial Relations Court, said that Mr Mansi could not bring himself within the provision because: "Where one of two partners leaves the partnership, there are no partners, but only a sole proprietor, after the change. Paragraph 9(5) does not cover the situation although perhaps it should." (At page 351D.)[25]That passage was subsequently relied upon by the Employment Appeal Tribunal in Wynne v Hair Control [1978] ICR 870, but that case was concerned with the obverse situation where a sole proprietorship gave way to a partnership of which the previous sole proprietor was a member. On any basis, it would be impossible to squeeze that within the statutory provision.[26]Some 10 years after Mansi, in Jeetle v Elster [1985] ICR 389, the Employment Appeal Tribunal considered the successor to the 1972 Act and the predecessor to the 1996 Act. Again, the provision was in substantially the same terms as the present section 218(5). Giving the judgment of the Employment Appeal Tribunal, Beldam J said, albeit obiter, that the reasoning of Sir John Donaldson had not been strictly necessary for the decision in Mansi, taking the view that the same results could have been achieved without the need for consideration of section 218(5). He added, at page 400, letters E to H:
"Looked at as a whole, paragraph 17(5) [that is the paragraph then in force] is quite clearly intended to be a comprehensive provision to cover changes in the composition of those who comprise an 'employer' in cases of partnership, personal representatives or trustees. We think there is no reason for taking the view that the legislature intended different considerations to apply to partners from those applying to personal representatives or trustees. It is only because the word 'partner' has the particular attribute of 'sharing with another' that the observations of Sir John Donaldson have point. It is permissible, where the context so allows, to construe words used in the plural as including the singular. The clear indication, we think, of sub-paragraph (5) is that any change in the partners (which might include, for example, the retirement of one of two partners) is not to break the continuity of the period of employment. Where the sub-paragraph says 'shall count as a period of employment with the partners' what is meant is 'with the partners or any one of them who was previously the employer in his capacity of partner in the organisation, trade or business, as the case may be'. So we would have declined to follow the observations in Harold Fielding Ltd v Mansi [1974] ICR 347."
[27]This passage reflected and was guided by a similar approach in an earlier EAT decision, Allen & Son v Coventry [1980] ICR 9.[28]It was against this background that the Employment Appeal Tribunal, in reaching its conclusion in the present case, expressly preferred the approach in Jeetle to that in Mansi.[29]Before reverting to section 218(5), it is appropriate to bring into the picture at this point section 218(2), to which no reference had been made by the Employment Appeal Tribunal, although its predecessor had been pivotal in Jeetle. Section 218(2) provides:
"If a trade or business, or an undertaking ... is transferred from one person to another - "(a) the period of employment of an employee in the trade or business or undertaking at the time of the transfer counts as a period of employment with the transferee, and "(b) the transfer shall not break the continuity of the period of employment."
[30]In Jeetle, it was the predecessor of this provision that provided the reason for the decision, just as it had in Coventry. In both cases, the EAT rejected a submission that the transfer did not come within the ambit of what is now section 218(2) because there had been no transfer from one person to another when the "other" was a partner in the transference or immediately before the transfer.[31]Section 218(2) was not mentioned in the decision of the Employment Tribunal or the judgment of the Employment Appeal Tribunal in the present case, and appears to have remained unmentioned until Mr Segal filed his skeleton argument in this court some seven months ago. He seeks to contend that if Mrs Stevens cannot rely on section 218(5), she can nevertheless rely on section 218(2). Mr Broatch objected to the late arrival of this issue, but having heard submissions, we granted permission for Mr Segal to file a respondent's notice out of time so that we could consider section 218 in the round.[32]Before doing so, it is pertinent to observe that although these provisions have been on the statute book for over 30 years and have been the subject of divergent judicial reviews in the Employment Appeal Tribunal for over 20 years, they do not appear to have received detailed consideration in the Court of Appeal before today. At least, that is so as far as section 218(5) is concerned.[33]I now revert to section 218(5). The rival submissions before us can be summarised with the utmost brevity. Mr Broatch contends for the analysis of Sir John Donaldson in Mansi; Mr Segal for what Beldam J said in Jeetle. Mr Broatch submits that the observations of Beldam J, and for that matter of Lord McDonald in the Coventry case, were obiter, both cases being decided on section 218(2). He is correct about that. He further submits that it is inappropriate for this court to adopt a purposive approach to the construction of section 218(5) because the provision has been with us since at least 1972; has been the subject of two consolidations since Mansi; and, as its origin predates our accession to membership of the European Economic Community on 1st January 1973, we should not deploy a method of construction which is of European origin and should be reserved for European derived legislation.[34]I unhesitatingly reject the latter submission. Purposive construction, whether by that or any other name, has been deployed by the courts of England and Wales for rather longer than Mr Broatch suggests, and is commonly deployed in the construction of statutes, however recent, and whether or not they owe their existence to European influences.[35]It is plain that the purpose of section 218(5) is to protect an employee in the enjoyment of his statutory rights notwithstanding changes of personnel in the partnership or among the personal representatives or trustees who employ him. Mr Broatch has no answer to the question of whether the purpose that is served when, say, three partners reduce to two is not equally valid and compelling when two partners are succeeded by one of them as sole principal.[36]In my judgment, there is no sensible reason for granting protection in the one case but not in the other. I consider that the provision should be so construed if the language permits it so to be.[37]So far as the language is concerned, Mr Broatch submits that after 6th March, Mr Bower was not in any sense a partner, and so there can be no question of a period of employment "with the partners" after that date. Mr Bower was by then a sole principal, neither more nor less. As regards Beldam J's reference to the plural including the singular, he submits that it is inappropriate in relation to "partners" because there can be no singular partner, although there can in many circumstances be a single personal representative or trustee.[38]In my judgment, it cannot be doubted that the intention of Parliament, which I ascertain by reference to the purpose of the provision as I have described it, must have been to embrace the situation in which two partners are succeeded by one of them, because there is no sensible reason to exclude it. I can do no better than to repeat and adopt what Beldam J has said in Jeetle, namely that:
"Where the sub-paragraph says 'shall count as a period of employment with the partners' what is meant is 'with the partners or any one of them who was previously the employer in his capacity of partner in the organisation, trade or business, as the case may be."
[39]In so doing, I respectfully disagree with what Sir John Donaldson said in Mansi. Accordingly, I conclude that the Employment Appeal Tribunal in the present case was right to find that there was continuity of employment until 30th March by reason of section 218(5). I would therefore dismiss the appeal on this ground.[40]As regards section 218(2), having dismissed the appeal as aforesaid, I would say only this. In my view, it is capable of applying where partners A and B dissolve their partnership, the business of which is thereafter carried on by B alone. I do not consider subsections (2) and (5) to be mutually exclusive. Nor do I consider Coventry and Jeetle to have been wrongly decided on subsection (2), although I tend to agree with the editors of Harvey on Industrial Relations and Employment Law, Vol 1, C1, paras 564 - 565 that it would be preferable to decide such cases on the basis of subsection (5), leaving subsection (2) for "external" transfers. However, I prefer to say no more about subsection (2) in the context of the present case. It has arrived on the agenda rather late, and I tend to the view that if it had become necessary to determine the appeal by reference to it, we would have needed further submissions on the authorities dealing with when a business is transferred for the purposes of subsection (2) in circumstances where it is known to be on the verge of closing down. Moreover, because subsection (2) was never considered by the Employment Tribunal, there is something of an evidential vacuum in relation to precisely what business was transacted during the three weeks in question.[41]In these circumstances, I prefer to say no more.

LORD JUSTICE LONGMORE:

[42]I agree for the reasons given by my Lord that the employment of Mrs Stevens and Mr Marc by Mr Bower was continuous up to and including 30th March 2001. It follows that the originating applications dated 27th June 2001 were therefore made in time.[43]I also agree with my Lord's remarks about the application of section 218(2) in this case.

LORD JUSTICE POTTER: I also agree.

[45]MR SEGAL: My Lord, the respondent does ask for the costs of this appeal.[46]MR BROATCH: My Lord, I have lost on the section 218(5) point, but there has, as my Lord has said, crept into this case at the late stage the additional consideration, and your Lordships have extended a discretion in my learned friend's favour. Therefore argument has rained over a wider field than might have been the case had that late amendment not been permitted, that exercise of discretion, as it were. Therefore, I would submit that your Lordships should limit the costs to a proportion of the costs, perhaps half, incurred by my learned friends, by the respondents' side.

LORD JUSTICE POTTER: We need not call on you concerning the costs. The appeal will have to be dismissed with costs to be paid on the standard basis. We do not feel there is any real additional costs added by that additional point.

[48]MR BROATCH: Would your Lordships therefore order a detailed assessment in default of agreement?

LORD JUSTICE POTTER: Yes.

[50]MR BROATCH: My Lord, before your Lordships rise, with some trepidation I raise an additional point. Your Lordships have resolved a difference of opinion between four divisions of the EAT, a point of some public importance, perhaps. Would your Lordship give the appellant leave to appeal to the House of Lords?

LORD JUSTICE POTTER: No, I am afraid you will have to interest their Lordships if you want to go there.

[52]MR BROATCH: I am obliged, my Lord.

LORD JUSTICE POTTER: Thank you. Orders: Appeal dismissed Respondent's costs to be paid by the appellant Permission to appeal to the House of Lords refused