UK Security Services (Midlands) Ltd v Gibbons & Ors [1991] UKEAT 104_90_2307

EAT
UK Security Services (Midlands) Ltd v Gibbons & Ors
[1991] UKEAT 104_90_2307 · 1991-07-23
(Midland) Ltd from a Decision of an Industrial Tribunal sitting at Bristol on the 27th November 1989 under the Chairmanship of Mr Sara, which decided that the two applicants Mr Gibbons and Mr Jones were dismissed by reason of redundancy and were entitled to redundancy payments against UK Security Services (Midland) Ltd. The Tribunal then adjourned the quantification and also dealt with another small matter, namely in connection with a payment in lieu of notice.This is a complicated and difficult case in many ways and raises once again the importance where there are sales of businesses or disposals of businesses that the interests and position of employees should be carefully examined and that arrangements or contractual agreements should be made dealing with the present and future position of those employees.The Applicants were employed and had been employed for some years by companies which changed their names and eventually became Lapwing Engineering Limited. That change of name was on the 19th November 1986.There came a time on the 26th October 1988 when a firm of accountants were appointed receivers and administrators under a debenture deed. Thereafter employees of that firm, Mr Menzies and Mr O'Connor were responsible for the management of the Company.It was decided that the business should be sold as a "going concern" and tenders were sought. The advertisement for the sale seeking tenders was dated the 1st November 1988. Tenders were to be in by noon on the 4th November and in fact two tenders were received. At 11.30 hours on the 4th November 1988 the two Applicants received notice of their dismissal. Presumably at noon the tenders were opened. At 12.30 hours they finished work, at 14.55 hours, still on the 4th November, contracts were exchanged and completion was on the 7th November 1988. Thereafter the two Applicants were given forms with which to make application to the Secretary of State for payment of redundancy money out of the fund, presumably on the basis which no one seems to have doubted, that Lapwing was insolvent; they did so, such forms being received by the Department on the 10th November. Thereafter, as they told the Industrial Tribunal, the Applicants made many calls by phone or by letter to the Department asking for their redundancy payments, and they were told that there were problems with administration and their applications were not being met.On the 12th June 1989 the Applicants were notified that by reason of the transfer their applications were being refused and that they had a right to apply to an industrial tribunal. This they did, Mr Gibbons, on an uncertain date, but probably in August, and Mr Jones on the 1st September 1989.It is quite apparent from those facts which we have already recited that the applications were outside the six month limitation referred to in Section 101(1) of Employment Protection (Consolidation) Act 1978. There is however, a saving sub-paragraph in Section 101, sub-section 2 whereby, if the claim is made within six months immediately following the first six months under sub-section 1 and it appears to the tribunal to be just and equitable that the employee should receive payment having regard to the reasons shown for the fact that it was not issued within the first six months, then it should be allowed to proceed.The Tribunal heard the evidence, it is set out in the notes before us; the explanations have been given and those explanations were considered by this Industrial Tribunal in the exercise of its discretion. Mr Robson, the Director of the Company appears before us today for the Company; they were represented by Counsel before the Industrial Tribunal; we have listened to what he has to say about the exercise of the discretion, but it seems to us that the matter was clearly put by the Industrial Tribunal in paragraph 11 and they exercise their discretion on appropriate and proper legal principles. Paragraph 11 reads thus:
"Both applicants, had, however, brought proceedings within the second six months referred to in s.101(2). The Tribunal, therefore, had to decide whether to exercise its discretion to allow the cases to proceed. Without prejudice to the other aspects of the claim the Tribunal decided that it was just and equitable to allow the applications to proceed. The applicants had clearly been led to believe that the Secretary of State would meet their claims until the rejection in June 1989. Thereafter we considered that they had acted sufficiently expeditiously. The third respondents suggested that the discretion should not be exercised against them because they knew nothing of the applicant when they bought the business, but the Tribunal took the view that it would be wrong to exercise our discretion in respect of one respondent but not another."
We are unable to discover any error in the decision of the Industrial Tribunal on that score and that point which was the first point taken by the Appellants must fail.Thereafter the Appellants raise, in essence, three matters. The shortest one to deal with and we deal with it therefore, first, although it was not dealt with first, is that in paragraph 31 of the Decision the Tribunal find that UK Security Services allow for a payment in lieu of notice, and they purport so to decide it under Section 122. Section 122 deals with the liability of the Secretary of State in connection with claims against him on the insolvency of the employer and there is a reference there in sub-section 3 to Section 49 of the 1978 Act. It seems to us that there is some misapplication of Section 122 and that matter will in any event be remitted to the Industrial Tribunal.That leaves two main arguments which are put forward in criticism of the Decision of the Industrial Tribunal; the first one is contained in paragraph (iii) of the Notice of Appeal and that reads:
"Whether there was any or any sufficient evidence upon which the Tribunal could reasonably have found as a fact that the dismissal of the Applicants was by reason of the transfer of the business of the Applicants employer to the Appellant or a reason connect with such transfer."
There was no dispute that there was a relevant transfer, but the question is whether the dismissal was by reason of the transfer, or a reason connected with it.The Tribunal clearly heard a great deal of evidence on this score. They deal with it in three particular paragraphs of the Decision. In paragraph 14 they find specifically that there was a practice of receivers in dealing with this type of situation, of dismissing employees immediately before the transfer, and that this was being done as a practice because of the understanding within the profession of the effect of a Court of Appeal decision, namely Secretary of State for Employment v. Spence [1986] ICR 651. The effect of Spence and some of the reasoning in Spence was of course varied; the overall view changed as a result of the Decision Litster v. Forth Dry Dock & Engineering Co. Ltd [1989] IRLR 161 . The first finding therefore was that that was the practice of Receivers and of this Receiver; then secondly, in paragraph 21 it is clear that the Tribunal found that the Receiver had decided that he was selling a business without any employees at the moment of sale and therefore that was an indication of the reason for the transfer; lastly, in paragraph 25 they find similarly on the evidence which was before them and it seems to us without referring in detail to the evidence of the learned Chairman that there was ample evidence to support that finding.The last point taken was that the Tribunal erred in the view which it took of the effect of Regulation 8 sub-regulation(1) and sub-regulation(2) of The Transfer of Undertakings (Protection of Employment) Regulations 1981.In paragraphs 26 and 27 of the Decision the Tribunal approach this matter and it seems to us, if we may paraphrase it, without reading two long paragraphs in this way: they first of all decided that there was a redundancy and in so doing they relied upon the presumption in Section 91(2) of the 1978 Act:
"For the purposes of any such reference, [that is a reference to the Tribunal claiming redundancy payment] an employee who has been dismissed by his employer shall, unless the contrary is proved, be presumed to have been so dismissed by reason of redundancy."
Having thus reached that stage, the Tribunal then went on to consider Regulation 8(1) and 8(2). Regulation 8(1) reads as follows:
"Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee shall be treated for the purposes of Part V of the 1978 Act and Articles 20 to 41 of the 1976 Order Unfair dismissal) as unfairly dismissed if the transfer or a reason connected with it is the reason or principal reason for his dismissal."
Pausing there, the Industrial Tribunal therefore, had decided that the transfer or a reason connected with it was the principle reason. It had decided that there was a redundancy and then needed to go on and consider sub-regulation (2) which reads:
"Where an economic, technical or organisational reason entailing changes in the workforce of either the transferor or the transferee before or after a relevant transfer is the reason or principal reason for dismissing an employee - (a)paragraph (1) above shall not apply to his dismissal..."
The Tribunal examined the evidence, considered whether there was an economic, technical or organisational reason and decided there was not and that the true reason behind was simply a practice of dismissing so as to get a better price for the business as a "going concern"; that it was not carefully thought through and logical to say it was economic, technical or organisational.The point put on Appeal, as we understand it, is that where one has a redundancy the redundancy must, in effect, come within the words "economic, technical or organisational". There seem to us to be two answers to that, first of all the finding was on evidence, that it was not strictly within that wording on a logical basis, but also that the presumption which is relied upon and showing that there was a redundancy, has already been applied before one is considering Regulation 8. Now, it is not strictly necessary for us to decide this difficult aspect of the matter in the present case but it seems to us that the view taken by the Industrial Tribunal was a tenable view.

(b) reads as follows:

"without prejudice to the application of section 57(3) of the 1978 Act or Article 22(10) .... the dismissal shall for the purposes of section 57(1)(b) of that Act ... be 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"
Progressing therefore, under the reasoning of 8(2)(b) the Tribunal then had to consider, having found that the reason was redundancy, and that was a substantial reason, they then had to decide whether, within Section 57(3), there had been a procedural error so as to make the dismissal unfair. They reached that conclusion in three lines at the end of paragraph 26 which reads:
"Therefore, even if the dismissal was not automatically unfair under Regulation 8(1), it was nevertheless unfair under s.57(3)."
The evidence was before them and clearly here, when one looks at the facts, which we recited at the start of this judgment, these two men were dismissed within one hour without any explanation or consultation, and although not expressly so stated, it seems to us on the facts that it is all too obvious that the Industrial Tribunal were clear in their minds that the procedural aspects were wholly unsatisfactory and rendered the dismissal unfair.Mr Robson has addressed us attractively and it is refreshing to hear someone being so totally frank. He has pointed out that he is not a lawyer, and that perhaps it could be said that he was addressing us on moral grounds rather than legal grounds. But he registered his complaint that the position in law, because of the Decision in the House of Lords in Litster, changed radically, and that no one imagined at the time this transaction took place, that his Company would be liable for the redundancy payments to these two Applicants. He was given no warning by the Receiver, and indeed, everyone assumed, because the forms were handed out that it was the Secretary of State who was going to be responsible for the redundancy payments as Lapwing were insolvent. He feels that they did not try to avoid their obligations and the assumption was that these employees would be looked after through the redundancy fund. He points to a letter from the Receiver, and indeed, the evidence of Mr Menzies.The evidence of Mr Menzies was not acceptable to the Industrial Tribunal, but it does seem to us that the Secretary of State, here, had been able to raise the defence, which has been raised, because of the change in the law in Litster . The House of Lords merely informed us all of what the law always had been. Although Mr Robson may feel that life has been hard upon him, nevertheless, in law there is no doubt whatsoever, in our judgment, that his Company is liable for the redundancy payments to these two men.We can only end where we started, this is yet another example where we would stress that it is so important for those handling these matters to bear in the forefront of their minds the interests and the position of employees, and to resolve how those interests are going to be met and dealt with when these transactions take place.It follows therefore, that this Appeal is allowed, limited to the one point on the payment in lieu of notice and that matter is remitted for consideration by the same Industrial Tribunal. As to the other issues, they fail. To that limited extent therefore, the Appeal is allowed.Mr Auld is awarded £850 costs.