Hancock v Hills (Tredegar) Ltd & Anor [1995] UKEAT 398_93_3110

EAT
Hancock v Hills (Tredegar) Ltd & Anor
[1995] UKEAT 398_93_3110 · 1995-10-31
MR JUSTICE MUMMERY (PRESIDENT) : This is an appeal by Mr M Hancock against the decision of the Industrial Tribunal held at Cardiff on 15 January 1993. The other Applicants were a Mr Shuck and Mr Jones. The Respondents were two companies, Hills Tredegar Ltd (in receivership) trading as Hills Coaches, and J D Cleverly Ltd, trading as Capitol Coach Group.In the full reasons notified to the parties on 8 February 1993, the Tribunal unanimously decided that the Applicants' employment was not continuous as between the first and the second Respondents. Accordingly, the second Respondents, Capitol Coach Group, were dismissed from the proceedings.Mr Hancock appealed against that decision by notice of appeal dated 19 March 1993. The other two Applicants did not appeal, but the circumstances in which they were not parties to the appeal give rise to no problems, because an application has been made today by Mr Wright for the joinder of Mr Shuck and Mr Jones to the appeal. That has not been opposed. We think it right to make that Order because the original case was brought by all three of them and there are no differences in the relevant facts affecting them.The case came before the Employment Appeal Tribunal on a preliminary hearing. An Order was made on 4 February 1994 allowing the appeal to proceed to a full hearing on the ground that there was an arguable point of law. The reason for the view taken by the Employment Appeal Tribunal is set out in the judgment given by Mr Justice Waterhouse on 4 February.The position today is that the case is argued for the Appellants by Mr Wright of the Free Representation Unit. A letter has been received from Capitol Coach Group, against whom the claim was dismissed. Their solicitors, Morgan Bruce, enclosed a skeleton argument on their clients' behalf and confirmed that it was not their intention to be present. It was pointed out in the covering letter of 13 October 1995 that reliance was placed on the decision of this Tribunal in Ibex Trading Co Ltd v Walton and others [1994] IRLR 564 .The relevant facts of the dispute and the decision under appeal can be briefly stated. They are set out in the Tribunal's full reasons. All three Applicants were employed for varying lengths of time by Hills Coaches. On 26 September 1991 the National Westminster Bank, as debenture holders, appointed two administrative receivers over the business of Hills. They discovered that the business was in a bad state. Payments had not been kept up for a large number of vehicles which were the subject of lending agreements. The Receivers feared that the vehicles would be repossessed shortly. Large numbers were repossessed in the first week of October. In addition, Hills lost a number of their private hire contracts and work for lorries carrying coal. On 27 September the authorities withdrew the ABTA bonding without which an effective coach operation cannot be carried on. A large travel firm said that they would have no further work for Hills after 7 October. The Receivers realised that, if they were to be able to trade the company profitably with a view to its eventual realisation, they had to make urgent economies or even have to make a forced sale. They consulted management. They were advised that the obvious sector in which to make economies was the private-hire sector. They were given a list of employees who Hills' managers said were private-hire drivers. The three Applicants were on that list.The decision sets out the subsequent events. On 30 September the Receivers dismissed 17 employees. Ten of those dismissed, including the three Applicants, were said to be private-hire drivers. The Tribunal explained how the Receivers found a purchaser for Hills Coaches. An agreement was made with Capitol Coaches on 12 November. That agreement was completed on 22 November. Capitol Coaches did not start operating that part of the concern which they bought until 22 November. They had not bought the whole of the undertaking. The contract made it clear they were purchasing the service part of Hills Coaches. That specifically excluded the private-hire part. As part of the agreement they took over 14 of the drivers who are mentioned in the schedule to the agreement.The Tribunal identified the question which they had to decide correctly, whether there was continuity of employment between Hills Coaches and Capitol Coaches. They referred correctly to the Transfer of Undertakings Regulations 1981, Regulations 5 and 8. They referred to the House of Lords decision in Litster and Others v Forth Dry Dock & Engineering Co Ltd and another [1989] ICR 341 . The Tribunal, after hearing evidence from Mr Simpson, an experienced and well-qualified member of Touche Ross, to which the Administrative Receivers belonged, found that:
"the reason for the dismissals of the applicants on 20 September had nothing to do with the transfer or the proposed transfer either to Capitol or to anybody else, but were solely dictated by the fact that, in order to avoid making a trading loss and in order to be able to keep the business going for as long as possible to sell it to the best advantage, it was considered essential by the Receivers to dismiss the 17 men on 30 September. There was not enough work for them to do because the coaches were shortly going to be repossessed, as was obvious to the Receivers. There was not sufficient money to pay them. Only the profitable routes and operations could continue to be operated and paid for."
The Tribunal added that they were satisfied there was no sort of collusion between Hills or the Receivers and Capitol. Capitol did not come on the scene until 15 or 16 October. The draft contract went out to their solicitors on 21 October. It was not signed until 12 November or completed until 22 November. In those circumstances, the Tribunal had regard to the gap between the date of dismissal on 30 September and the contract and completion dates. They concluded that:
"it is quite unreal to suggest that the applicants were `employed immediately before the transfer' and also that it is unreal to suggest that their dismissal was a dismissal for a reason within Regulation 8(1)."
They went on to deal with a point under Regulation 8(2). It is not necessary to examine that on this appeal.The point argued by Mr Wright was regarded as an arguable point at the preliminary hearing and was the reason why the case was directed to come forward to a full hearing. The essence of Mr Wright's argument, explained in a helpful skeleton argument, is that, on the proper application of Regulations 5 and 8, as interpreted by the House of Lords in the Litster case, the Tribunal erred in coming to the conclusion that the Applicants were dismissed for a reason other than the transfer or a reason connected with the transfer.The central argument in that, at the time of the dismissal, the receivers were considering the ultimate transfer of the assets and liabilities of the company in receivership, Hills Coaches. They were seeking effectively to realize the company's assets to enable them to transfer the company. In order to achieve that, the receivers arranged dismissals, including the dismissal of the three Applicants. Mr Wright argued that despite the gap, between the date of dismissal and the date of the contract and completion, the correct approach, which should have been adopted by the Tribunal, was that there was continuity within the meaning of the Regulations. All three Applicants should have been regarded by the Tribunal as employed "immediately before the transfer". Mr Wright emphasized that, at the date of the dismissals, the Receivers had in mind, as stated by the Tribunal, the ultimate transfer. Thus, although the transferee remained unidentified at the date of dismissal, there was a contemplated transfer. That was sufficient to establish continuity of employment. It was irrelevant that Capitol had not, at the date of dismissal, begun to express an interest in taking a transfer of the undertaking. "The ultimate transfer", Mr Wright said, "was a matter which was in the minds of the Receivers at the date of dismissal and that was sufficient in law to entitle the Applicants to succeed."Mr Wright presented that argument clearly and concisely. We are indebted to him for that assistance. We are unable, however, to accept that his submissions identify an error of law in the Tribunal's decision. In our view, the submissions on behalf of the second Respondents in their skeleton argument show that there was no legal error in this case.The submissions highlight the findings of fact by the Tribunal. Prominent in those findings of fact is an account of the financial position of the Company, encountered by the Receivers when they were appointed. Due to their financial position, Hills Coaches were unable to make payments on lending agreements. This meant that vehicles would be repossessed or would have to be returned and that there would not be sufficient work for all the drivers. There was not sufficient work due to the loss of a number of private-hire contracts and coal-carrying contracts. Economies had to be made. The reason for dismissing these employees was the pressure to make those economies, arising out of the financial position of the Company. The Tribunal found as a fact that the reason for the dismissals had nothing to do with the transfer to Capitol Coaches.In support of the submissions, the second Respondents refer in their skeleton arguments to the decision of the Employment Appeal Tribunal in Ibex Trading Co Ltd v Walton [1994] IRLR 564 . Mr Wright has submitted that that decision is not binding on us and, in any case, is distinguishable on the facts.In our view, it is clear from the principles stated in Ibex Company Ltd , on the proper interpretation of Regulations 5 and 8, that this Tribunal reached a legally correct decision. These dismissals of these Applicants would have taken place, even if there had not been a later transfer of the undertaking. The Receivers had these dismissals forced upon them by the need to make a reduction in the scale of the business, given the loss of contracts and the return of or repossession of the coaches.In those circumstances, we have come to the conclusion that this appeal should be dismissed, because there was no error of law by the Tribunal. The Tribunal, on the facts found by them, correctly applied Regulations 5 and 8 to reach the conclusion that the dismissal was not by reason of a transfer or for a reason connected with the transfer. It is not necessary to deal with the provisions of Regulation 8(2) which were the subject of a separate finding by the Tribunal. It is only necessary to consider those if it is found that the reason for the dismissal was the transfer or reason connected with it. In such a case, it is possible for the employer, in the circumstances defined in Regulation 8(2), to raise a defence of an economic, technical or organizational reason.For those reasons the appeal is dismissed.