Connolly v Sellers Arenascene Ltd [1995] UKEAT 501_93_1602

EAT
Connolly v Sellers Arenascene Ltd
[1995] UKEAT 501_93_1602 · 1995-02-16
MR JUSTICE MUMMERY (PRESIDENT): This is an appeal by Mr Connolly against the decision of the Industrial Tribunal held at Leeds on 11 and 12 January 1993 and 14 April 1993.For the full reasons notified to the parties on 18 May, the Tribunal unanimously decided that Mr Connolly's applications for unfair dismissal against the Respondents failed and should be dismissed.The Respondents were, first, Sellers Arenascene Ltd and, secondly, Jarvis Porter Plc and Jarvis Porter (Promotional Products) Ltd.Mr Connolly was dissatisfied with that decision and appealed by notice of appeal dated 7 June 1993. The case first came before the Employment Appeal Tribunal on 24 January 1994 as a preliminary hearing. The Tribunal directed that the appeal be allowed to proceed to a full hearing and ordered the production of the Chairman's notes of evidence in relation to specific issues and also gave leave to amend the notice of appeal.At the hearing today Mr Duggan appears for Mr Connolly and Mr Garside QC appears for Sellers Arenascene. Jarvis Porter originally intended to appear and, in fact, submitted a skeleton argument at the end of January, summarizing the submissions they wished to make on the appeal. They have not taken any part in the hearing of the appeal because the solicitors acting for Mr Connolly had written a letter saying that it is no longer alleged that a substantial part of Mr Connolly's employment responsibilities accrued to Jarvis Porter when Jarvis Porter purchased Designer Golf.In order to understand the points made on the appeal it is necessary to look at the factual background to this dispute. In 1978 a company called EGP Sports Group began business. It was not a limited company. EGP Sports Group Ltd was incorporated in 1984. There were four divisions, Corporate, Hospitality, Designer Golf and Arenascene. The fourth division is a limited company, Arenascene Ltd. Corporate and Hospitality Divisions provided packages at sports events. Arenascene provided portable stadium seating and accommodation and the Designer Golf Division, which was acquired by Jarvis Porter, the second Respondents, provided sports merchandising.On 25 June 1987 Mr Connolly, who was the moving spirit in EGP Sports and its Divisions, entered into a written service contract with EGP Sports Group Ltd. A copy of the service agreement was in evidence before the Tribunal and is before us. Under that agreement. EGP Sports Group Ltd appointed Mr Connolly and Mr Connolly agreed to act as the Chairman and Managing Director of EGP and also of Arenascene Ltd. The appointment commenced, in March 1978 and was to continue until determined by 24 months' notice in writing by either side.In 1990 there were negotiations with the Expedia Group with regard to the EGP Sports Group Ltd becoming part of a larger company. Expedia acquired a 20% share-holding of EGP Sports Group Ltd, with an option to purchase the balance.In November 1991, International Resort Holdings, which I shall call IRH, a plc, bought 20% of the share-holding from Expedia and took over the option to purchase the balance from EGP Sports Group Ltd. In April 1992 IRH exercised the option to take over the share and EGP Sports Group Ltd became a wholly-owned subsidiary. In connection with that, on 3 April 1992, Mr Connolly entered into a written employment agreement with IRH. We have a copy of that agreement. Under that agreement, IRH appointed Mr Connolly and Mr Connolly agreed to act as a Director of IRH and Managing Director of its wholly-owned subsidiary, EGP Sports Group Ltd and of Arenascene Ltd. The appointment was dated to commence from 3 April 1992 and to continue, subject to earlier terminations provided in the agreement, for a fixed period of almost three years from then until 31 March 1995.The position was that, after the entry into that agreement, Mr Connolly continued to render services to EGP Sports Group Ltd and they paid his salary. On 15 May 1992, Messrs Smith and Williamson, accountants, were appointed as receivers of IRH. Within a few days of their appointment they wrote a letter on 19 May to Mr Connolly saying that they had been appointed joint administrative receivers of IRH under the terms of debentures granted to the Bank of Scotland. The letter said:
"In my capacity as an agent of the company, I regret to advise you that the company is no longer in a position to make payments to you for services rendered under your contract of employment. You should therefore regard your employment as terminated as of today."
It is common ground that, as a result of that letter, Mr Connolly ceased to be employed by IRH on 19 May 1992.Mr Connolly, after that date, continued to do work for and to receive payments from EGP Sports Group Ltd.On 21 May 1992 Grant Thornton were appointed receivers of EGP Sports Group Ltd. There was relevant correspondence from the joint administrative receiver of EGP Sports Group Ltd to Mr Connolly, beginning with the letter of 15 June. Mr Saville, as administrative receiver, wrote the following letter to Mr Connolly, c/0 EGP Sports Group Limited:"I refer to the Employment Agreement dated 3 April 1992 between International Resort Holdings PLC ("IRH") and yourself.Please note that my appointment as Joint Administrative Receiver of EGP has not in any way altered that agreement and your contract of employment remains with IRH.As EGP requires your services, EGP is prepared to reimburse your salary until such time as those services are no longer required.Please note that the Joint Administrative Receivers are not personally adopting the Employment Agreement with IRH nor any other contract which you may have with IRH or EGP. The Joint Administrative Receivers accept no personal liability in respect of your contract of employment."Mr Connolly replied to that letter on 17 June:

"Dear Mr Saville

I am in receipt of your letter dated 15 June regarding the contract of employment with IRH and EGP.I have worked solely for EGP as Managing Director since the date of this contract, have been paid by EGP and I regard myself as solely employed by EGP and reserve the rights that affords me."Nothing was said by Mr Connolly in that letter to correct the misapprehension that Mr Saville was under that Mr Connolly still had a contract of employment with IRH. No mention was made of Mr Connolly's dismissal from IRH by the letter sent by the receivers of that company to him on 19 May.On 18 June, Jarvis Porter agreed the terms of the take-over with the receiver of EGP and on 20 June, Grant Thornton, as receivers of EGP, sold Arenascene, as well as Hospitality and Corporate Enterprises, to the company now known as Sellers Arenascene. We have a copy of that agreement, which, it is common ground, constitutes a transfer of business and assets. On 22 June 1992, Mr Saville, as receiver of EGP, wrote a letter to Mr Connolly further to the earlier correspondence, saying:
"At the meeting at my offices on the evening of 19 June 1992 you stated that you regarded yourself as having at all times been employed by EGP. Please let me have a copy of what you regard as your service agreement with EGP so that I may investigate the matter further.
If it transpires that you do have a valid service agreement with EGP, which at this stage is not accepted, please accept this letter as formal notice terminating your employment with EGP with immediate effect. If it is determined that you have a valid service agreement with International Resort Holding Plc ("IRH") then you should obviously look to IRH."To complete the chronology, on 1 July 1992, Jarvis Porter bought Designer Golf as a going concern. It is no longer necessary to follow the details of that purchase because, for reasons mentioned, Jarvis Porter is no longer actively involved in the claims made by Mr Connolly.That is the background to the proceedings.In September 1992 Mr Connolly presented originating applications containing claims of unfair dismissal. He presented the applications against Jarvis Porter, in succession to EGP Ltd, against Sellers Arenascene, in succession to Arenascene Ltd, and against the receiver, Mr Saville, as agent for Arenascene, Sellers Arenascene, EGP Sports Group Ltd and Jarvis Porter. In each of the applications his complaint was that he had been dismissed summarily on 22 June 1992, allegedly on the grounds of redundancy and the Respondent companies continued to trade as going concerns. It is clear from those that the claim Mr Connolly was making was based on the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 1981 and, in particular, regulation 5(1) which provides that:
"... 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."
The claims were disputed. An IT3 was filed by Jarvis Porter on 5 October 1992. In the middle of October 1992 Sellers Arenascene put in their notice of appearance, They simply said:
"The Applicant was not employed by, paid by, involved in or indeed dismissed by Sellers Arenascene Limited or its predecessor Arenascene Limited."
That was the dispute that was brought by the parties before the Industrial Tribunal in Leeds in January and April 1993. The Tribunal identified the issue in paragraph 1 of their full reasons, saying:
"This is an application by Mr Gerard Christopher Connolly on the grounds that he was unfairly dismissed for redundancy on 22 June 1992 when he was dismissed by Mr Hull, the Receiver for the company for whom he worked at the time."
That identification of the dispute is the beginning of an error which has been identified by Mr Duggan, on behalf of Mr Connolly, in the decision, which resurfaces later in the decision and which he says should lead to this Tribunal allowing the appeal and remitting the matter of Mr Connolly's claims to the Industrial Tribunal for a rehearing. The paragraph continues:
"He brings his application against two respondents, Sellers Arenascene Ltd, the first respondents, and Jarvis Porter PLC, the second respondents, and he claims against those two respondents on the basis that there was a transfer of undertakings within the Transfer of Undertakings Regulations 1981 and consequently the dismissal was connected with the transfer and therefore either or both of the two respondents are liable."
Having dealt with representation, the Tribunal referred to the history of the relevant companies. I have already summarized that. We can pick up the full reasons for the decision at the end of paragraph 7. The Tribunal said in the last sentence:
"But the question for this tribunal is, were these Divisions transferred as going concerns [that is the Divisions, which I have already described] and was the applicant employed by EGP and/or Arenascene on 20 June, when the transfers took place."
In paragraph 8, the Tribunal summarized Mr Connolly's case. It was:
"that the three Divisions, Arenascene, Hospitality and Corporate Entertainments, were transferred as going concerns to Sellers Arenascene and at the time of the dismissal on 22 June, he was employed by Arenascene and also EGP, although as far as Hospitality was concerned it seems that only the assets were taken over and therefore, it was not taken over as a going concern. The point is that Arenascene was taken over by Sellers and became Sellers Arenascene and the applicant claims that at the time of his dismissal he was employed by Arenascene and there was a transfer within the Transfer of Undertakings Regulations."
The Tribunal, having set out the rival submissions, made their findings. In paragraph 10 they said:
"This tribunal find that Arenascene was a separate entity from EGP. It had its own assets, its own employees, its own business, and it had a proper accounts system and charges were made to Arenascene, and that EGP and Arenascene were, in fact, two separate corporate entities. ... We find that the applicant had been employed by EGP under a contract which is dated the 25 June 1987, that was his original contract ..."
They then traced through his new contract in the form of the service agreement with IRH on 3 April 1992. Paragraph 11 continues:
"IRH themselves then got into financial difficulties and Mr Connolly was dismissed by the Receiver on 22 June and he has come to the tribunal and claims that he was, in fact, employed by EGP, whereas we find he was employed at that time by IRH. In any case, we find that Arenascene is separate from EGP and in any case Sellers Arenascene were advised not to take over anything that connected them with EGP. The business of Arenascene was transferred but the applicant was not an employee of Arenascene. We find that he was employed by IRH and not employed by Arenascene at the time of the transfer. Insofar as there has been any suggestion of any collusion or fraud between the first respondents and the Receiver to show that there was not a relevant transfer but only of the assets, we do not find any evidence of that. Sellers Arenascene had not bought the whole of IRH but only part of it and it was not the part in which the applicant was employed and we find no transfer of the applicant to Sellers Arenascene."
It was for those reasons that the Tribunal found that Arenascene was the transferor company and that the unanimous decision of the Tribunal was that the application should fail.On this appeal, Mr Duggan says that there is an error in the decision of the Tribunal. Mr Garside for Sellers Arenascene accepts that there is an error but submits that it is an immaterial error, which should not lead to this appeal being allowed. The argument of Mr Duggan is this: that the reasoning of the Industrial Tribunal was seriously flawed. Their decision was that Mr Connolly was employed by IRH on 22 June and that that employment was not terminated until after the transfer. What he says is this:
"1. The Tribunal ... erred as a matter of law in deciding that Mr Connolly was employed by IRH Plc at the time of his dismissal [22 June] rather than by EGP Sports ..."
The Tribunal found that Mr Connolly was employed by IRH on 22 June, the date that he was dismissed by Mr Hull of Grant Thornton. That, it is argued, is an error of law because on the facts recited, Mr Connolly had already been dismissed by the receivers for IRH, Smith and Williamson, on 19 May 1992 with immediate effect. In the light of that fact, Mr Connolly could not be, and was not, employed by IRH after that date.As already mentioned in the summary of facts, Mr Connolly continued to work for EGP Sports Group and Arenascene after 19 May. He was paid his salary by EGP through Arenascene. On this basis the argument is mounted by Mr Duggan that Mr Connolly continued to be employed by someone after 19 May. He could only be employed by someone after he was dismissed by the receiver of IRH. It is submitted that it is clear that, as he continued to work for EGP and Arenascene, after 19 May, he must have been employed by one or other of them. The error of the Tribunal was not to consider the effect of Mr Connolly's contract of employment having already been terminated by IRH on 19 May. Mr Connolly had been dismissed on 19 May. Mr Hull had dismissed him. It was Mr Hull, the receiver of EGP, who had dismissed him on 22 June.Mr Duggan reinforced these submissions by reference to the correspondence have already referred to and concluded with this submission: Mr Connolly:
"... could only have worked for EGP and/or Arenascene between 19 May 1992 and 22 June 1992 as IRH had ceased to employ him on 19 May 1992.
The Tribunal erred in failing to consider whether as a matter of fact the Appellant in reality worked for EGP Sports Group Limited rather than IRH Plc."He elaborated his submission by saying that Mr Connolly was really employed by EGP and Arenascene for these reasons: he was at all material times paid by EGP; the Tribunal failed to take account of the fact that all of the work that Mr Connolly had carried out was for and on behalf of EGP and/or Arenascene; the Tribunal failed to take account of the fact that Mr Connolly continued to work for them after he was dismissed by IRH on 19 May, and the contract of employment that he had had with IRH had described him as the Managing Director of both EGP and Arenascene. The reality was that he was employed by EGP and Arenascene and, the consequence is drawn that, as the transfer was by Arenascene, he gets the benefit of the Transfer of Undertakings Regulations.We are unable to accept those submissions as leading to an order allowing the appeal and remitting the matter for rehearing by the Industrial Tribunal. We accept the submissions made by Mr Garside that, although the Tribunal did fall into error in misdating the dismissal of Mr Connolly from IRH as 22 June, a post-transfer date, when the real date 19 May, they did not in fact make an error of law which was material to the claims in the proceedings.Mr Garside argued correctly that the case Mr Connolly was presenting depended on establishing, by virtue of the TUPE Regulations, a contract of employment being transferred to Sellers Arenascene. Mr Garside referred to the employment history of Mr Connolly, already summarized. He identified the relevant transfer date correctly as 20 June 1992, when Sellers Arenascene acquired the business and assets of Arenascene. He makes these submissions, which we accept:
"The agreement of the 20th June 1992 was a relevant transfer within the meaning of Regulation 3 of the Regulations and the contracts of employment of the employees of Arenascene Limited were transferred to the First Respondent. The Appellant, however, had no contract of employment with the transferor (Arenascene Limited) ..."
That was found as a fact by the Industrial Tribunal. It was quite beside the point that the Tribunal had reasoned under the false impression that Mr Connolly remained an employee of IRH down to 22 June.Mr Garside submitted that:
"if, contrary to the finding of the I.T. ... it was contended that the agreement of the 20th June 1992 was a sham and the real transferor was E.G.P. Sports Group Limited, [that was a contention which had been advanced by Mr Connolly at the Tribunal]
Sellers Arenascene contended that Mr Connolly was not and never had been employed in the part of the undertaking transferred. The arrangement with the receiver was a contract for services and, therefore, Mr Connolly was not employed within the meaning of the Regulations.We agree with that submission because, having been taken through the employment history of Mr Connolly, the relevant documents and the notes of evidence, it appears to us an impossible contention to maintain that Mr Connolly was employed by EGP Sports Group Ltd. The position was that he did have a contract of employment with them. That is the written service agreement from 25 June 1987. That was replaced in 1992 when a written employment agreement was made on 3 April between IRH and Mr Connolly. Under that agreement he did work for and was paid by EGP Sports Group, but it is clear that the terms of the agreement, which was a legally-drawn document, made Mr Connolly an employee of IRH.The argument that, on the termination of the IRH agreement on 19 May, Mr Connolly therefrom became an employee of EGP Sports Group and/or Arenascene is based on a fallacy. The only arguments brought forward to support that are that he was doing work for them and being paid by EGP Sports Group Ltd and/or Arenascene. That is what he was doing while he was still employed by IRH. In our view, simply removing the IRH employment agreement from the facts does not mean that Mr Connolly, on ceasing to be an employee of IRH, became an employee of EGP Sports Group Ltd or Arenascene. It is a non sequitur to argue that he did become an employee.In our view, the decision of the Tribunal was legally correct, although flawed by a factual error as to the date of Mr Connolly's dismissal by IRH. It was an error that had no legal significance in the ultimate decision. We are satisfied on consideration of the decision, the relevant correspondence and service agreements and the notes of evidence, that this decision was correct. The appeal should be dismissed.