O'Connor v Brian Smith Catering Services [1992] UKEAT 5_91_1803

EAT
O'Connor v Brian Smith Catering Services
[1992] UKEAT 5_91_1803 · 1992-03-18
MR JUSTICE KNOX : This is an Appeal by Mrs O'Connor the Applicant before the Industrial Tribunal from a decision of the Industrial Tribunal sitting at Reading on 2 November 1990, sent to the parties on 14 November, that Mrs O'Connor did not have 2 years continuity of service to qualify her to bring a claim for unfair dismissal.Mrs 0'Connor was employed successively by Compass UK Ltd from 4 July 1988 to 8 September 1989 and I will call them "Compass" and by the Respondents to her Originating Application Brian Smith Catering Services from the following Monday after her employment with Compass ceased in September 1989 until 3 July 1990. If there was continuity of employment between the two it was not suggested that she did not have the necessary 2 years, conversely if there was not continuity of employment she plainly did not have those 2 years which are necessary for claims for unfair dismissal to be prosecuted successfully.The Industrial Tribunal gave its Full Reasons in a decision which takes the following form. The basic facts are first of all set out, then the arguments on either side are related and finally the Industrial Tribunal stated its conclusion in a relatively short space and in a very condensed form.The basic facts which were not significantly in dispute were that both Compass and Brian Smith Catering Services were caterers engaged by the Lord Chancellor's Department in relation to the provision of catering facilities at the Oxford Crown Court building and as I have said, Mrs O'Connor was employed by those two successive caterers.The premises on which the catering activities were conducted were within the ownership and control of the Lord Chancellor's Department and the catering was put out to tender. Compass obtained the grant of the right to conduct the catering but that came to an end in September 1989 and it was as a result of a successful tender that Brian Smith Catering Services got the catering contract thereafter. There is one point of fact which was challenged on behalf of Mrs O'Connor, the Appellant, in relation to the conduct of the business which it will be convenient to get out of the way, and this was that the Industrial Tribunal found that the Lord Chancellor's Department fixed the tariff which a successful tenderer was to charge and on a consideration of the evidence before the Industrial Tribunal we are satisfied that that is a conclusion for which there was no evidence but it is not, in our view, a matter which goes to the root of the problem before us.What was found and not challenged was that the Lord Chancellor's Department provided all the equipment and the caterers in succession, provided the staff, of which of course Mrs O'Connor was one; they also provided the materials and they accounted to the Lord Chancellor's Department both for the takings and were indemnified by the Lord Chancellor's Department for the cost of provision of the catering facility. There was a fixed fee at a flat rate paid to the successive caterers and the fixtures and fittings belonged to the Lord Chancellor's Department. There was no question of any book debts passing from one caterer to another on the change in the concession and the materials and stock in trade were purchased as matters progressed by the Lord Chancellor's Department but there was in fact a small amount of stock, only a few pounds, that was purchased from Compass by Brian Smith Catering Services. That appears to have been treated as de minimis and we can see no ground for criticising that aspect of the matter.So far as goodwill is concerned the submission on behalf of the Respondent employer was that the successive caterers had no goodwill and if that was wrong it was submitted that the goodwill was not transferred. That is a subject to which I must return.The Industrial Tribunal then went on to state the arguments on either side and considerable reliance was placed on the way in which the argument on behalf of the employer was put, notably in connection with the decision in ROBERT SELIGMAN CORPORATION v BAKER [1983] ICR 770. What the Industrial Tribunal said on this score was this:
"In support of his contention Mr Booth [I interpose for the employer] cited inter alia Seligman -v- Baker 1983 ICR 770 wherein Browne-Wilkinson J delivering the judgement of the EAT said that in that case as the concessionaire had no business there could be no transfer."
The Industrial Tribunal then goes on to relate what was said about Seligman -v- Baker in other respects and particularly in relation to goodwill in connection with which the Industrial Tribunal says this:
"He [meaning Mr Justice Browne-Wilkinson] then went on to analyse in detail the different types of goodwill concluding that what used to be known as "dog" goodwill, being the goodwill which attaches to the proprietor and not the premises, had not vested in the new concessionaire because the old concessionaire had not contracted not to compete with the result that the "dog" goodwill remained vested in the old concessionaire and could have been used and exploited by it. In the instant case Compass had no fixtures or fittings to transfer and even if it had "dog" goodwill, which simply by the nature of the operation is very questionable, nothing was done which indicates any intention by Compass to transfer to or vest in the respondent the benefit of such goodwill."
There are two things to observe about that paragraph; one is that it is not entirely clear to us whether what the Industrial Tribunal was doing was, at least in the latter part, relating the submissions that were being made to them, or whether they were accepting that this was indeed the effect of SELIGMAN -v- BAKER . The other observation is that the Appellant, for whom Miss Smith appeared and to whom we are indebted for her helpful argument, submitted that it was wrong to say that Mr Justice Browne-Wilkinson had said that as the concessionaire had no business there could be no transfer. We are satisfied by reference to the report in SELIGMAN -v- BAKER that her submission is correct. The crucial question was identified by Mr Justice-Browne Wilkinson in his judgment. The background factual situation in that case was that there were successive concessionaires of a hair dressing establishment in a department store and a question arose as to whether or not there had been a transfer of a business within the Transfer of Undertakings (Protection of Employment) Regulations 1981 from the first concessionaire to the second and in that context the first concessionaire being Seligman and the second being Roband Mr Justice Browne-Wilkinson said this:
"The crucial question therefore is whether there was any goodwill belonging to Seligman's business at the store which became vested in Roband. If there was not, there cannot have been a part of Seligman's business which, on any meaning of the word "transfer," could have been "transferred" to Roband. There must undoubtedly have been goodwill attached to the hairdressing department at Debenhams' Romford store. Many customers must have used it habitually as their hairdressers. But to whom did that goodwill belong: to Debenhams or to Seligman?"
and then the Learned Judge analysed the several different sorts of goodwill that could well have attached to that operation. Some of them plainly were Debenhams' property, that is to say, first, the goodwill attributable to the habit of using that store and secondly the goodwill attributable to the business being carried on in Debenhams. Others would have attached the Learned Judge found to Seligman or to Seligman's staff and as a result of that analysis and as a result of the admitted fact that there was no bar on Seligman competing within the immediate neighbourhood, the conclusion was reached that there was no transfer of goodwill from Seligman to Roband, part of the goodwill belonging to Debenhams and not to Seligman anyway and another part of it not having been relinquished by Seligman.It will be observed that it was no part of the Employment Appeal's conclusion that Seligman was not entitled to a business. Indeed at page 773

the Judge said this:

"On ceasing to carry on their business at Romford, Seligman would be taken to have dismissed the applicant.."
and it appears throughout that the assumption from which the Employment Appeal Tribunal departed was that there was indeed a business being conducted by Seligman. The question was whether it had been transferred for the purposes of the regulations, in such a way as to bring the regulations into operation and the question was answered in the negative.The other authority which was recorded as having been referred to by Counsel for the employer before the Industrial Tribunal was HADDEN -v- UNIVERSITY OF DUNDEE STUDENTS' ASSOCIATION [1985] IRLR 449 a case which bears some factual resemblance to this case in that it was concerned with catering activities. The statement of the facts in the report relates that the Appellant was employed by the Respondent Students Union as a manageress of their catering facilities from 1977 until August 1983. The Students Union, when the loss at which they operated got too large, entered into a 12 month agreement in August 1983 with an outside organisation called ARA Services Ltd under which the latter provided management supervision and control of the catering service at no cost but were remunerated by a commission on net sales.She was dismissed by the Students Union and then engaged by ARA as their manageress. Then in 1984, that is to say in the following year, the union decided to allow the agreement with ARA to come to an end by effluxion of time and to take over the catering services themselves. But Mrs Hadden was told that she was not going to be re-engaged and she took the point that she would become automatically employed by the Students Union when the catering services reverted to them and that was the problem that faced the Scottish Industrial Tribunal which by a majority decision decided that there had been no relevant transfer of an undertaking and that the regulations did not apply.That decision was upheld by the Employment Appeal Tribunal sitting in Scotland and it was stated albeit obiter that there were two separate categories of case, one where an organisation such as a students union farmed out its catering activities to contractors so as to involve the relevant transfer of a commercial undertaking. Normally it would be expected that such contractors would employ all the staff and control the prices. The other possible interpretation of that sort of arrangement was for outside contractors to be engaged to provide catering services in circumstances which did not involve the transfer of an undertaking and an example of that would be where a contractor simply provides a manager and was remunerated on a fee or a percentage basis without having overall control.Generally, what was held and this is part of the decision, was that whether the circumstances of a particular case gave rise to an inference that there had been a relevent transfer of an undertaking was a question of fact and degree and that in that particular case the Industrial Tribunal was entitled to find that there was not a carrying on of a commercial undertaking within the terms of the regulations.We would accept, and indeed this was not challenged by Miss Smith, that that latter proposition is one which is in accordance with the law and that it is indeed a question of fact and degree whether or not in particular cases there has been a transfer of an undertaking within the meaning of the regulation.The Industrial Tribunal then recorded the argument the other way which was largely based on European Court of Justice authority which it is not necessary to go into in any sort of detail because the Industrial Tribunal accepted the submission that was based on that authority namely that it is not so much the ownership of the undertaking which needs to be looked at for the purposes of the directive upon which the regulations are based as whether the economic unit involved has retained its identity and whether it continues to be run by the same staff as was employed before the event which caused the change.The Industrial Tribunal then stated its conclusion in this short paragraph:
"We have little doubt that if we were to find that Compass had an undertaking in the nature of a business the granting by the LCD to the respondent of the right to operate the catering establishment at Oxford Crown Court would have operated as a transfer of that business within the Foreningen principle."
That I pause to observe is of course one of the authorities of the European Court of Justice and looks to be the case that had been cited in the preceding paragraph which is usually referred to by the name more readily pronounceable by English tongues of DADDY'S DANCE HALL [1988] IRLR 315 . Continuing with the Industrial Tribunal's decision and the critical sentence in the whole of their decision:
"Unfortunately for the applicant we find both as a question of fact and law that Compass had nothing in the nature of a business to transfer. In the absence of a business and a transfer of that business the Transfer of Undertakings (Protection of Employment) Regulations 1981 cannot be invoked. Accordingly as the applicant does not have continuity of employment and was not employed by the respondent for the requisite period of two years she is precluded from pursuing her claim alleging unfair dismissal."
The latter sentence is not challenged if the premise on which it is founded is correct. It is a grave difficulty in the path of an Appellant to have a decision as condensed as this. On the other hand we bear in mind that Industrial Tribunals are not Courts of Law and do not have to set out the grounds upon which they reach their conclusions of fact and of law in full in the way that a Court of Law is required to. But the fact remains that this is an extremely condensed decision which hinges on the single sentence that I have read.The Notice of Appeal attacks it, not perhaps as one might have expected, on the basis that the parties are entitled to be told why they have won and why they have lost, but on the following basis.First of all it is said that the Industrial Tribunal erred in law in failing to distinguish in the material facts in the SELIGMAN case and the present case. Secondly, in asking the wrong question namely "whether or not Compass had a business to transfer" or alternatively "whether Compass had any intention to transfer to or vest in the Respondents the benefit of goodwill". Thirdly, in failing to address the question generally whether a relevant business had been transferred for the purposes of Regulation 3. Fourthly, in failing to address at all the question of continuity of employment under Schedule 13 to the Employment Protection (Consolidation) Act 1978 and finally, in having made a finding that there was probably no goodwill to transfer, apparently then relying on the fact that there had been no transfer of goodwill as determinative of whether or not there was a relevant transfer.Dealing with those several points of law in turn, we have already indicated that we accept the inaccuracy of the statement of the effect of the decision in SELIGMAN 's case. Whether that is an inaccuracy on the formulation by Counsel or whether it is an inaccuracy which can properly be put at the door of the Industrial Tribunal is not entirely clear to us but true it is that insofar as SELIGMAN v BAKER was taken as being an authority for the type of situation there described as leading to the conclusion that there was no business to transfer, there would be a legal error. But it does not seem to us that even if one makes the assumption that the Industrial Tribunal associated itself with the proposition that Mr Justice Browne-Wilkinson found that there was no business in SELIGMAN that this would make any significant difference to the decision that they reached in the present case. The SELIGMAN case undoubtedly did have factual distinctions from the present one, notably that there was what was conveniently called in argument a captive audience in this case in a way which was factually entirely different from the customers in the SELIGMAN case who were ladies who resorted to Debenhams to have their hair done and who could not by any stretch of the imagination be described as captive.In our case there no doubt is very little choice for those who want refreshments and food in the Oxford Crown Court in the rather limited period of time that is available in such establishments for such purposes between either bringing their own thermos flask, doing without or employing the catering facilities at the Oxford Crown Court and in that sense there would be what was described as a captive audience. There is therefore clearly a factual distinction between the SELIGMAN case and the present one but we are not satisfied that the Industrial Tribunal can properly be regarded as having decided that there was no business in Compass because of the fact that in SELIGMAN they thought erroneously there was no business in SELIGMAN 's. That seems to us to be much too large an assumption for us to make in the absence of any positive indication to that effect.Secondly, we do not accept that there was a wrong question asked by the Industrial Tribunal in addressing the question whether or not Compass had a business to transfer. In our view that was indeed a central question which it was necessary for the Industrial Tribunal to address and which they did address and upon which they stated the facts in a way which, apart from the relatively trivial and innocuous error about who fixed the prices, was so far as we can tell entirely accurate. So that that claimed error of law seems to us not to be an error at all.We do accept that it was not a critical point that Compass had no intention to transfer what is described as "dog" goodwill, that is to say the goodwill attaching to Compass personally. We accept the implied qualification that there very probably was no such goodwill in the particular circumstances of this case because although there was some evidence that Compass had advertised itself, it does seem in the nature of things unlikely that there could be any sort of comparison between this type of goodwill that a hairdresser generates with his customers on the one hand and the sort of goodwill which a caterer in a Crown Court might conceivably generate with people taking refreshments there.But here again the question that the Industrial Tribunal was actually looking at was the question whether, assuming that there was goodwill attached to the person, there was any indication that there was effectively a transfer of such goodwill and so far as that is concerned, and it is a very small point because as we have said we doubt whether that particular type of goodwill did exist, we would accept that there plainly was no such transfer so that the criticism, although well placed, that it is irrelevant what Compass' intention on the score was, is not relevant in any real sense because the fact was that insofar as that goodwill had any significance at all, it was something that Compass undoubtedly did not transfer. The criticism although well founded, does not lead to the conclusion that the decision is one that cannot stand.We also should deal although it is not dealt with separately in the Notice of Appeal, with the question of the possibility of any other type of goodwill subsisting and that would be the goodwill in connection with the premises as opposed to those who operated the catering facility. Here again it does not seem to us that there probably was any very large amount of goodwill in any realistic sense. The tendency of customers to revert to the canteen for refreshments would more likely be a function of the fact that that was the only readily available place to do so than to be a function of the quality of the service that had in the past been given. But assuming in favour of the Appellants that there would be such goodwill, it does not appear to us to have been any part of the Industrial Tribunal's decision that an erroneous analysis of the way in which that goodwill passed, was part of the conclusion that the Industrial Tribunal undoubtedly did reach namely that Compass had nothing in the nature of a business to transfer.The third separate ground of Appeal that there was a failure to address the question generally whether a relevant business had been transferred, seems to us misplaced. What there may perhaps have been is a very short and succinct conclusion on the question but the question was undoubtedly addressed and answered so that we do not find an error of law in that once one accepts that an answer as brief as this is susceptible of being a proper answer.Then one comes to the 13th Schedule to the Employment Protection (Consolidation) Act argument. True it is that there was a submission made before the Industrial Tribunal in the alternative, based on the 13th Schedule which deals with continuity of employment. It figures in the Chairman's notes at page 18 in our bundle. Equally true it is that there is no separate mention of that submission in the Industrial Tribunal's decision. But it seems to us inevitable that if the conclusion that is expressed namely that Compass had nothing in the nature of a business to transfer is correct, it must carry with it failure by the Appellant on the question that arises under Schedule 13. The relevant difference between the two is that the regulations do specifically require that there should be something in the nature of a commercial venture, or rather it excludes what is not in the nature of a commercial venture before there can be an undertaking for the purposes of the regulations. That is in contrast to the situation under Schedule 13 of the Employment Protection (Consolidation) Act which incorporates the definition of a business in Section 153(1) of the Act which is wider and makes no reference to any commercial venture and it was argued before us that the wider definition in the Employment Protection (Consolidation) Act would have been of assistance in countering an argument that might have been advanced, that there was no commercial venture here so far as Compass were concerned and that therefore the 13th Schedule at least might have provided a remedy for Mrs O'Connor even if the regulations did not. But as we have already intimated, it seems to us that unless one postulates a business whose ownership changes the 13th Schedule equally does not bite and the way in which the regulations were found not to be applicable, if correct, in our view excludes the 13th Schedule as well.Finally, there is the point on goodwill raised. We do not accept that the Industrial Tribunal relied on the fact that there had been no transfer of goodwill as determinative of whether or not there was a relevant transfer. They have not said that. The most that they said was in quoting the argument for the employer that nothing was done that indicated any intention by Compass to transfer the personal goodwill and that in terms is in fact correct. There is no statement by the Industrial Tribunal that the fact that there was no transfer of goodwill means that there was not a relevant transfer, indeed the analysis is that there was not a business vested in Compass and that, as we understand it, is a finding that the activities that went on in the Oxford Crown Court, in themselves in our view plainly of a business nature, were a business that was not vested in Compass but was no doubt vested in the Lord Chancellor's Department. Now that is a conclusion of fact in our view. It may possibly be a conclusion that other Tribunals might not have reached but it is not our function to substitute our views on such questions of fact as this and in those circumstances we consider that this Appeal must fail and it will be dismissed.