Pittman v Davis Build Plc (In Liquidation) [1991] UKEAT 122_90_0910

EAT
Pittman v Davis Build Plc (In Liquidation)
[1991] UKEAT 122_90_0910 · 1991-10-09

SIR DAVID CROOM-JOHNSON : This has not been an entirely easy appeal because we have had to consider it with argument from only one side. The Respondents Davis Build Plc we have been told, are now now in liquidation, and we have accordingly amended the title of the proceedings to allow for that fact and they have understandably not been represented before us. We have had however the advantage of a very careful and extremely thorough argument from Mr Tizzano to whom we are indebted for the help that he has given us.

It is an Appeal from a decision on a preliminary point by an Industrial Tribunal decided on 4 January 1990. We should mention in addition, that at the outset of the hearing today, we gave Mr Tizzano leave to amend his Notice of Appeal by adding certain paragrapahs which had been supplied to the Employment Appeal Tribunal in advance.The facts upon which the whole matter turns were that Mr Pittman, the Applicant, was employed at a place called Frognall House, Sidcup in 1980. He was taken on there by a company named Kellygate to take charge of security. Frognall House is a Grade II listed building in seven acres of land and Kellygate at that time were the contractors engaged in renovating the property for use as offices. When the work was completed Mr Pittman's employment was transferred to a company called Housetrend Ltd, the then owner of the land in 1982. The Tribunal said in their decision that they were not aware of the circumstances of that transfer and did not know whether the continuity of Mr Pittman's employment was preserved. They went on to find facts as follows.What we do find is that Mr Pittman was continuously employed by Housetrend Ltd and by a number of associated companies until Frognall House was conveyed in August 1988 by one such company named Land and General Investments Ltd to the Respondents to these proceedings, Davis Build. Mr Pittman was then employed by Davis Build until he was dismissed by them with effect from 8 September 1989. Mr Pittman's duties from 1982 to August 1988 were to be responsible for security of the property, to cut the lawns and to make sure that both property and grounds were maintained in good condition until a purchaser could be found. Outline planning permission was obtained by Housetrend Ltd. or one of its associates, for conversion to residential use and the benefit of that passed with the sale to the Respondent company Davis Build. The Respondents purchased the property with a view to developing it for residential use and selling the residential units to make a profit. By the time of the hearing of the Industrial Tribunal that work had progressed to a considerable extent and Mr Pittman's services were dispensed with because the Respondents decided to employ a specialist firm to be responsible for security on the site. We interpolate at this point to say that that was understandable because with the site being developed into residential units the problem of security was obviously going to be somewhat different from that when Frognall House was simply one empty house standing by itself.

The findings of fact continue as made by the Tribunal as follows:-

"8. An income tax form P45 in respect of Mr Pittman was given by the Vendor to the respondents in August 1988. It shows Mr Pittman's date of leaving as 12 August 1988. Mr Pittman received a letter from a Mr B Motion of Tempocrown Ltd. dated 11 August 1989 which states as follows:
and the letter is then quoted:
"Following our conversations you will be aware that we have now disposed of the major part of our interest in Frognall House and in future you will be employed by Davis Build Ltd. and you will look to Mr Richard Cooke for your continued instructions from Friday, 12th August"."
The letter then gave the address and telephone number of Davis Build Ltd. and finished upby saying:
"Thank you very much for all your help and assistance in the maintenance of Frognall House and I take the opportunity of wishing you good fortune in the future."
What Mr Pittman wanted to do then was to apply, and did apply, on the basis that he had been unfairly dismissed by the Respondents and the issue was put by the Tribunal in this way:
"If Mr Pittman can add his service between 1982 and August 1988 with Housetrend Ltd. and its associates to his employment with the Respondents, then he has the necessary continuous employment to qualify for the right not to be unfairly dismissed."
The Respondent pleaded to that with various defences of which there was no investigation and the whole matter went off on the preliminary point before the Industrial Tribunal that there was no continuity of employment between 1982 and the dismissal in 1989 by the Respondents. The Tribunal came to the conclusion that there had been no continuity of employment and accordingly dismissed the application on the hearing of the preliminary point.It is necessary before dealing with the arguments which have been addressed to us by Mr Tizzano to deal with the statutory position. The Tribunal founded its decision on the terms of Section 151 of the Employment Protection (Consolidation) Act 1978 and in particular to sub-paragraphs, sub-sections (1) and (2). It is worth pointing out at this stage that Section 151 was substituted for the previous section 151 by the Employment Act 1982, Section (20) Schedule 2 paragraph 7(1). It reads now as follows:-"References in any provision of this Act to a period of continuous employment are, except where provision is expressly made to the contrary, to a period computed in accordance with the provisions of this section and Schedule 13".I need not read the rest of sub-section (1). Sub-section (2) reads:
"In computing an employee's period of continuous employment any question arising as to - (a)whether the employee's employment is of a kind counting towards a period of continuous employment, or (b)whether periods (consecutive or otherwise) are to be treated as forming a single period of continuous employment,

shall be determined in accordance with Schedule 13."

We need not read the rest of sub-section (2).Turning to Schedule 13 of the 1978 Act, it deals entirely with the computation of the period of employment. The relevant paragraph of that schedule is paragraph 17. One needs to read only the first two paragraphs. Paragraph 17, sub-paragraph (1) says:
"Subject to this paragraph ......the foregoing provisions of this Schedule relate only to employment by the one employer."
Paragraph 17, sub-paragraph (2) reads as follows:
"If a trade or business or an undertaking (whether or not it be an undertaking established by or under an Act of Parlliament) is transferred from one person to another, the period of employment of an employee in the trade or business or undertaking at the time of the transfer shall count as a period of employment with the transferee, and the transfer shall not break the continuity of the period of employment."
As the word " undertaking" appears in paragraph 17, sub-paragraph (2), and the words " trade or business " are also included in it, one has to go back to Section 153 of the Act which is its Interpretation section, which so far as relevant says:

"In this Act, except so far as the extent otherwise requires -

. ."business includes a trade or profession and includes any activity carried on by a body of persons, whether corporate or unincorporate;..."It is pointed out to us by Mr Tizzano that the inclusion of " any activity " in a trade or business is very wide and should be construed liberally in favour of Mr Pittman. I stressed that that section had been amended in 1982 because the other statutory provisions which were put before the Tribunal were The Transfer of Undertakings (Protection of Employment) Regulations 1981 on which Mr Tizzano relied. The Industrial Tribunal was minded not to allow Mr Pittman to rely upon those regulations but in our view it does not make any difference whether the regulations or the statute fall to be considered in relation to this case.The 1981 regulations have an interpretation regulation which includes two definitions."Relevant transfer" means a transfer to which these regulations apply and "transferor" and "transferee" shall be construed accordingly and
"undertaking" includes any trade or business but does not include any undertaking or part of an undertaking which is not in the nature of a commercial venture."
We pause to say that in view of the definition of undertaking in the regulations they may perhaps be regarded as slightly more restrictive than Section 151 and the Schedule of the Act.Regulation 5 deals with the effect of relevant transfer on contracts of employment and reads as follows:
"5.(1) A relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred but any such contract which would otherwise have been terminated by the transfer shall have effect after the transfer as if originally made between the person so employed and the transferee."
That deals with the ordinary legal position requiring privity of contract between the employer and the employee and (in effect) for the purpose of the Regulation, abrogates it. 5(2) says:
"Without prejudice to paragraph (1) above, on the completion of a relevant transfer - (a)all the transferor's rights, powers, duties and liabilities under or in connection with any such contract, shall be transferred by virtue of this Regulation to the transferee; and (b)anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part shall be deemed to have been done by or in relation to the transferee."
The approach which was made to this legal position and by these facts by the Industrial Tribunal was that they had to see whether there had been a transfer under Section 151 sufficient to allow for the service under the vendors and their associated companies back to Housetrend, to be added to the period of employment with the Respondents. What was submitted by Mr Tizzano was that during the whole time up until his dismissal Mr Pittman was doing the same job that he always had done, looking after the house and the grounds, keeping them tidy, and that in those circumstances what he was doing was part of the business of the vendors who, I think, had a title of Land Developments Ltd.Accordingly, what has to be considered, is whether the work which Mr Pittman was engaged upon was work which was part of the business carried on by the vendors. It has been said, and we accept, that what of course must be investigated is what was the business of the transferors of the employee. There has not been in fact any detailed investigation before the Industrial Tribunal of what their business was, but it is perfectly clear and I think was assumed by everybody throughout that Housetrend and their associated companies down to the vendors were property developers. They were people, or companies at any rate, who bought land with the idea of selling at a profit if they could, or buying land, getting planning permission and developing it and selling at an even increased profit if they could, and obviously it was in their interests for the purposes of doing that that they should maintain the property secure and in good condition.Mr Tizzano submitted to us that the maintenance and security of the property of this house, Frognall Court, was part of the business which was transferred so as to comply with the regulations or to meet the requirements of the regulations, but what seemed to the Industrial Tribunal and seems to this Tribunal to be the true situation was, that the business which was transferred was not the business of the vendors as property developers. What was transferred was the house and ground, and the house and ground was the fruits of their business of trading in land and property but they did not change the ownership of that business or do more than sell off whatever land they had. It was not even disclosed in the course of the evidence before the Industrial Tribunal whether Frognall Court was the only property owned by the vendors or whether it was part of the property which they had in their business as property traders or developers, but it does not make any difference if it was part of their land stock or land bank. It was not a disposal or transfer of their business but only a disposal of one of their assets, and accordingly on the basis upon which the facts were assumed to be, we do not think that there was any breach of the requirement by the Industrial Tribunal to make an investigation into the business of the vendors. It was assumed to be perfectly clear and the Industrial Tribunal in fact said that the facts were not in dispute.What is quite clear whether it is under the Section or under the Regulations, is that the business which has to be transferred and indeed the undertaking under the Regulations expressly says so, is that it must be a business of a commercial nature. It must be a commercial undertaking and business and trade indeed requires that business should enter into whatever it is that is transferred. We have not disregarded the definition in Section 153 of what is meant by business as including the word "activity" but nevertheless "activity" must be understood in the same context as being a commercial activity. This, under the regulations, certainly was reinforced by a decision of a Scottish Employment Appeal Tribunal in Stirling v. Dietsmann Management Systems Ltd [1991] IRLR 368 where the whole point of the undertaking was that it should be of a commercial nature if continuity of employment was to be invoked.What clearly happened when this house was sold was that the vendors simply sold an asset, they did not sell their business, they did not sell their undertaking and we have been referred by Mr Tizzano to the authority which indicates that it is quite sufficient if less than the whole of the undertaking is transferred but if part of it is transferred. That is quite clear from a decision of Green v. Wavertree Heating and Plumbing Co Ltd [1978] ICR.928. That was a case in which a company which had two sides to its business, a gas fitting business and a plumbing business, got rid of one of those two and continued with the other and the question arose as to whether the whole of the business needed to be transferred or not and it was quite clearly established by the Employment Appeal Tribunal in that case that a part of the business may be transferred but that in order to qualify for the continuity of the employment provisions under the Act or the Regulations that the part which is transferred must be an identifiable or recognisable part of the business.So the question has therefore come down to this. When this house was sold to the Respondents, what was it that was sold? Should it be regarded, if it could be regarded, as part of the business of the vendors? Mr Tizzano says it was that part of their business which was the necessary part of any property developers business of looking after security and maintenance. The Industrial Tribunal said " No ". They said what was sold was in fact simply land, that is the house and the surrounding land, and that there was no sale of any part of the vendor's business in the form of Mr Pittman's services. We have come to the conclusion, we may say with considerable reluctance because we have every sympathy with Mr Pittman, that the decision of the Industrial Tribunal was correct and there was no misdirection by them. The Industrial Tribunal had to come to that conclusion on the basis of the evidence which was put before them and on the basis of the arguments addressed to them and it does not appear anywhere from the evidence that when the sale of the land took place that there was any fresh sale, or separate sale, or consideration, in respect of any contractual right to employ Mr Pittman as the maintenance man. We have not neglected to remember that in the letter which was referred to in the Industrial Tribunal's decision that was written by Tempocrown on 11 August 1989 that Mr Motion said this to Mr Pittman:
"Following our conversations you will be aware that we have now disposed of the major part of our interest in Frognall House and in future you will be employed by David Build Ltd."
No explanation has ever been advanced as to what was meant by the " major part " that was referred to there or whether there was any retention by the vendors of some interest in Frognall House and we simply have to call attention to that point. It was following conversations with Mr Pittman and it did not look as though Mr Pittman was able to add to that in the oral evidence which he gave to the Industrial Tribunal. At all events we do not think that the mention of " major part" in that letter in any way invalidates the conclusion which the Industrial Tribunal came to. Indeed, it appeared that the attitude of the vendors was that once they had sold the house that was the end of their employment of Mr Pittman because they gave him his P.45 and said that in future his employment would be with the purchasers.

The Industrial Tribunal went on to say in paragraph 20 of their decision:-

"It is not disputed that the Respondents took over the Applicant's employment and we have found that despite the existence of an income tax form P.45, the Applicant's employment continued without a break with the present Respondents until it was terminated in September 1989."
By Schedule 13 of the 1978 Act however periods of employment only constitute continuous employment for the purpose of an unfair dismissal complaint if they are with the same employer unless there is a transfer of a trade, business or undertaking as provided for by paragraph 17(2)."They went on to say that try as they might, they could not find that the house was sold as a going concern, it was clear that no activity had been taking place in Frognall Court during the six years after it had been acquired by Housetrend Ltd. having been put in order by Housetrend and acquired thereafter by their associated companies, whichever they were.

They said:-

"We cannot find that any business was being carried on by the vendor of Frognall House in 1988. There was no activity upon the property and the applicant's duties were those of caretaker, i.e. he was maintaining the status quo until a purchaser could be found."
We have anxiously considered whether in any way the activities of Mr Pittman could be regarded as an independent activity and independent business of the vendors transferred by them to the purchasers the present Respondents. It was submitted by Mr Tizzano that the maintenance and security was a part of the property development's business before the sale. That is probably right, but the sale of this house was not the sale of their business or any part of it. It was a sale of an asset of the business.The need to look to see whether there was any sale of a going concern arose because of the reliance placed by Mr Tizzano on a number of cases and in particular the case of Lloyd v. Brassey which was the sale of a farm and in that case there clearly was a going concern. That was distinguished by the Industrial Tribunal on the basis that a farm which was a going concern, was not the same thing as an empty house like Frognall Court. Indeed, it might well be that if the farmland in Lloyd v. Brassey had been standing unfarmed and fallow that the decision might not have been the same but we say nothing about that.In the circumstances therefore, although we have sought hard to find a way of acceding to Mr Tizzano's skilful arguments and for which we are extremely grateful, we have regretfully come to the conclusion that we cannot find the Industrial Tribunal came to a wrong decision and accordingly this appeal must be dismissed.