Compass Security Ltd v Jeffs [1993] UKEAT 89_91_0302

EAT
Compass Security Ltd v Jeffs
[1993] UKEAT 89_91_0302 · 1993-02-03
MR JUSTICE KNOX: The appeal before us is brought by Compass Security Limited, (I will call them "Compass") from a unanimous decision of the Industrial Tribunal sitting at London (South) on the 4th December 1990 when it held that Mr Jeffs, the Applicant before them, had the necessary period of continuous employment, 2 years, for him to bring a claim for unfair dismissal and that accordingly the Industrial Tribunal had jurisdiction to hear his case. There has been no decision of any sort on the merits of the claim for unfair dismissal. Neither the Industrial Tribunal nor this Tribunal is concerned with that aspect of the matter but purely with the continuity of employment issue.The basic facts, as the Industrial Tribunal itself said, were not really in dispute. Mr Jeffs was employed at first by an organisation called Nelson Bakewell who were the Managing Agents for two buildings in Clifford Street, London, WC1, owned by a company called Randsworth Trust. That employment of Mr Jeffs started in September 1987. In December 1988 the properties in Clifford Street were sold by Randsworth Trust to another company, Next Properties plc, and there was, in connection with that sale, a change of Managing Agent in that the new owners of the property did not employ the same Managing Agents. Next Properties employed a Mr John Di Stefano as the Managing Agent to manage those properties.The events that occurred and caused Mr Jeffs to become the employee of Compass, which it was common ground before the Industrial Tribunal was what had happened, are found in paragraph 3 of the Industrial Tribunal's decision and those facts are as follows:
"The applicant said that he filled in some personal details for the respondents [that of course is Compass] and began to be employed by them on 12 December 1988. Mr Nowell, the Sales Manager of the respondents said that the respondents did a good deal of security work for John Di Stefano who had a policy of not employing employees direct and that he was telephoned by Mrs Devonshire, a representative of John Di Stefano, with an inquiry as to the terms on which the respondents would take on the security of the properties which had been bought by Next plc and which were now being managed by John Di Stefano. Mrs Devonshire inquired if the respondents would take on the security and whether they would also be prepared to employ the applicant and another security man who had been employed by Randsworth Trust to look after the buildings. Mr Nowell said that he would consider this matter after the respondents had gone through their normal security vetting procedures but that in principle and subject to the two employees being vetted satisfactorily he could see no objection to their employment. Mrs Devonshire then said that she wished the salaries of the two men to be increased and that Mr Nowell was to quote for the price of the security on the basis of an increased salary stipulated by Mrs Devonshire plus the respondents' own fees for handling the matter. Mr Nowell said, and we accept, that although the respondents paid the applicant, the whole of the applicant's salary was reimbursed to the respondents by Mr John Di Stefano together with a handling fee in respect of the security of the property. Accordingly we find that although the respondents employed the applicant they had no control over the remuneration of the applicant which was determined by John Di Stefano and reimbursed by him to the respondents."
In connection with that it is not insignificant to compare those findings with the case that was actually put in the Originating Application by Mr Jeffs:
"I was employed by Nelson Bakewell on 18th September 1987 as Caretaker of Clarebell House in Cork Street and Bond Street House in Clifford Street. These two properties were owned by Randsworth Trust plc for whom Nelson Bakewell are Managing Agents. The two properties, Clarebell House and Bond Street House, were sold to Next Properties plc in December 1988. At a meeting at Bond Street House on 8th December 1988, attended by myself, Mr Bill Knowles and Ms Felicity Devonshire (the representative of John Di Stefano (who were the new Managing Agents for Next Properties) the latter asked me to stay on as Caretaker at an increased salary of £500 and that my employment would continue under the same terms and conditions ie bank holiday entitlement, monthly salary etc. She added that since John Di Stefano did not employ directly, I would operate under the umbrella of Compass Security who were the Company's Security Agents. On the basis of this agreement, I signed a document headed Custodian Security Limited Agreement on 12th December 1988. I continued to work just as before and was paid monthly, my bank holidays were honoured and I worked in plain clothes just as before."
It is apparent to us that whatever else the Industrial Tribunal did, they did not accept entirely what was said in that first paragraph of Mr Jeffs' Originating Application because there was a very significant difference between the tripartite meeting which was relied upon in the Originating Application and the telephone conversation which the Industrial Tribunal clearly held occurred between Mrs Devonshire, on behalf of John Di Stefano on the one side and Mr Nowell on behalf of Compass on the other side. So that we have the facts in paragraph 3, not entirely in accordance with the way in which the Originating Application set them out.The conclusion that the Industrial Tribunal came to on the basis of those facts was that there was continuity of employment and it is perfectly clear that it is essential to the establishment of jurisdiction in the Industrial Tribunal that there should be continuity of employment because Mr Jeffs' employment ceased either early March or late February 1990, according to which side was right about the ultimate effective date of termination of 1990, and on those dates it is plainly necessary for him to be able to couple his admitted employment by Nelson Bakewell with his equally admitted employment with Compass in order to achieve the necessary two years. If he can couple them then he clearly has got the necessary period of service. It all, therefore, hinges on whether there was continuity of employment as a result of what happened in and about December 1988. The first conclusion that the Industrial Tribunal drew was that there was a transfer of undertaking in two directions. First of all they found a transfer of undertaking in relation to the ownership of the buildings, and, secondly, and this is the material one, there was in consequence a transfer of undertaking in relation to the management of the building. But the only reason that is given for that latter conclusion is the connected transfer of the building itself. What they actually said was this:
"We find on the evidence presented to us that there was here a relevant transfer in that the business carried on by Randsworth Trust was transferred to Next plc and that as a consequence of that transfer the responsibility of managing the buildings was transferred from Nelson Bakewell to John Di Stefano. The transfer of the managing agency was a natural consequence of the sale of the building and was in our view itself a relevant transfer in that it was the transfer of an undertaking, namely the management of the building which was occasioned by reason of the transfer of the ownership of the building itself. It is to be noted that by virtue of paragraph 3(2) the Regulations apply whether the transfer is effected by sale or by some other disposition or by operation of law. In this instance we find that the transfer was effected by some other disposition and that other disposition was the transfer of the managing agency necessarily and inevitably occasioned by the sale of the buildings. This finding of course, means that the transferee is John Di Stefano and not the respondents and this leads us to an examination of the relationship between the respondents and John Di Stefano."
The only reason that one can discern for the conclusion that there was a relevant transfer, within the meaning of that phrase as been given by the Transfer of Undertakings (Protection of Employment) Regulations 1981, which I will call "the Regulations" is that it was a transfer that was necessarily and inevitably occasioned by the sale of the buildings. That in itself, seems to us, not to be a correct conclusion, because the sale of the building is neither the necessary nor the inevitable cause of a transfer of a Managing Agent. One has only to appreciate that an employer who does not transfer the building can perfectly well transfer the Managing Agency if his contract so permits and equally a new owner of buildings on the occasion of a transfer by way of sale could perfectly well continue to employ the same Managing Agent as his transferor had theretofore employed. There is no necessary, or inevitable connection between the sale and the change in the Managing Agency. That is not to say of course that in many cases, as indeed in this one, the one is not the occasion for a change in the other but it is not anything which is necessarily involved in it and what is perhaps more serious is that, so far as we can see, it has absolutely no bearing on the question whether there is a relevant transfer, for the purposes of the Regulations, or a transfer which is within Schedule 13, paragraph 17(2) of the Employment Protection (Consolidation) Act 1978 of a trade or business or undertaking. That is the provision in the 1978 Act which determines whether there is continuity of employment. In both cases, whether one looks at paragraph 17(2) of the 13th Schedule to the 1978 Act or to the Regulations and the definition of a relevant transfer therein, one has to compare the before and after situation and see whether, to use the language which has been used by the European Court of Justice, there is an economic unit which can be said to have been transferred. The other way in which the matter has in the past been tackled under the 13th Schedule, paragraph 17(2) by the Courts in this Country is very commonly epitomised in the proposition of Mr Justice Widgery in Kenmir Ltd v. Frizzell [1968] 1WLR 329, where at 335 he said:
"In the end the vital consideration is whether the effect of the transaction was to put the transferee in possession of a going concern, the activities of which he could carry on without interruption."
So that what seems to us to have been the proper field for enquiry was to see whether there was really a "going concern" to use that language, or an "economic unit" to use the European Court of Justice's formulation as between the two Managing Agents. That would be the first stage and there is no trace of that process having been gone through. That leads us to the conclusion that if this was the only matter that was in issue it would be necessary for the Industrial Tribunal to be asked to reconsider the matter in the light of authorities, many of which it is fair to record, have seen the light of day since this decision was made shortly after the 4th December 1990.But that is not the only issue because the Industrial Tribunal went on, having found this relevant transfer of the Managing Agency to John Di Stefano to analyse the relationship between John Di Stefano and Compass in terms of principal and agent. They arrived at the conclusion that because in the handling of the security of the building Compass were acting as the Agent of John Di Stefano, Compass were transferees within the meaning of that expression for the purposes of the Regulations of the managing agency undertaking. That is indeed, as we see it, the way in which the case, first of all was impliedly put, by the paragraph which I have read and need not repeat, from the Originating Application, and how the case must have been put, one infers, before the Industrial Tribunal which had before it a member of the Bar from a legal advice centre to represent Mr Jeffs. We should mention in passing that we have not had any representation on behalf of Mr Jeffs before us today but we have had a full and helpful argument from Mr Giffin, who appears for Compass but did not appear below.There are two questions which arise in relation to the argument based on principal and agent that the Industrial Tribunal accepted and applied. The first is whether the conclusion that there was such a relationship of principal and agent, is one which, on the facts found, the Industrial Tribunal was correct in law in discerning. The second is, whether, assuming that they were thus right, it leads to the conclusion that Compass were indeed the transferees for the purposes of the Regulations. It will suffice for present purposes for us to concentrate on the latter of those two propositions because we are satisfied that even if one makes the assumption that there was a principal and agent relationship between Di Stefano and Compass it does not lead to the conclusion that Compass thereby became a transferee. There are two possible approaches to identify a transferee for these Regulations. One is to look at the question of ownership of the undertaking and that is the approach which is effectively encouraged by the provisions of the 1978 Act where it has frequently been said, and was said notably in an unreported decision of the Court of Appeal, to which we had our attention drawn, Mannin Management Services Limited v. Charles Derek Ward decided on the 7th February 1989 that paragraph 17 of the 13th Schedule has to be read in the same sense in relation to transfers of undertakings as Section 94 of that Act which as the heading to the Section says, deals with, change of ownership of business. On that basis one is, for that purpose, looking at ownership of the business and not of course ownership of assets which are used in the business, a distinction that has been drawn in many reported cases, notably Melon v. Hector Powe Ltd [1980] IRLR 477.Now, whether one adopts that attitude of looking at the ownership of the undertaking in question, or whether one adopts the attitude which has been espoused in interpreting the Regulations and the Directive upon which the Regulations were founded by the European Court of Justice of looking to see where control, rather than ownership resided, it seems to us that where the relationship is one of principal and agent it is the principal and not the agent who has both ownership and effective control and on that basis the conclusion which the Industrial Tribunal reached and which for present purposes we assume they were justified in reaching that there was a relationship of principal and agent between John Di Stefano as principal and Compass as agent does not in our view lead to the conclusion drawn by it that that makes Compass the transferees. They were not the owner of the management agency undertaking nor did they, on that analysis, have proper control of it, they were only agents in its operation.For those reasons it seems to us that the reasoning of the Industrial Tribunal is fatally flawed in its preliminary decision. We have given serious consideration to the question whether we should remit this case for re-examination of the relationship between the parties but it seems to us that that would not be a proper thing for us to do because it would involve, if the case on behalf of Mr Jeffs on this issue was to be successfully prosecuted, the identification of an entirely different analysis of the parties' relationships. In principle it might be possible, if the evidence was available, to come to the conclusion that there were here two successive transfers, one a transfer of the Managing Agency from Nelson Bakewell to John Di Stefano and the other a transfer by John Di Stefano to Compass of a discernible part of that business, the security aspect, which was capable of standing on its own as a separate "economic unit" or "going concern". There was, so far as we can tell, nothing in the Originating Application aimed at any such analysis. Equally it is fairly evident that there was nothing said before the Industrial Tribunal in support of any such way of putting the case, if it had been thus put, it seems to us inevitable that there would have been some reflection of that in the Industrial Tribunal's decision, and there is none. Accordingly, we are satisfied that first, it would be a new case before the Industrial Tribunal and secondly, it would be a case that would need a deal more evidence than is available in the decision before us, and thirdly, it would be a case which would appear fraught with very considerable difficulty because whereas one can see that there may well have been something in the nature of an economic unit in relation to the Managing Agency it is very far from clear to us, on such material as we have, that the same can be said in relation to the security aspect which appears to have consisted of two employees, one who had been the employee of Nelson Bakewell, the Managing Agent, and the other a gentleman who had been the employee of Randsworth Trust, the owner of the property. Whether there really is discernible an "economic unit" in that respect must be a matter of quite considerable speculation.For all those reasons it seems to us that it would not be right for us at this late date to remit the matter for reconsideration but that the case that was made on Mr Jeffs' behalf on continuity of employment necessarily fails and on that basis this appeal must be allowed and the application of Mr Jeffs, will I fear, have to be dismissed.