Gaines v Picturedrome Theatres Ltd [1995] UKEAT 661_95_1611

EAT
Gaines v Picturedrome Theatres Ltd
[1995] UKEAT 661_95_1611 · 1995-11-16
MR JUSTICE MUMMERY (PRESIDENT): This is an appeal by Mrs Lisa Gaines against the decision of the Chairman of the Industrial Tribunal sitting alone at Bristol on 24th May 1995. The case before the Tribunal was a claim for unfair dismissal of Mrs Gaines by the respondents, Picturedrome Theatres Limited and Mr Peter Walker.The Chairman decided in the extended reasons sent to the parties on 5th June 1995 that Mrs Gaines's application should be dismissed and that her complaint of unfair dismissal should be struck out.Mrs Gaines appealed against the decision by a Notice of Appeal served on 20th June 1995. The Notice of Appeal sets out the grounds on which Mrs Gaines contends that there were errors of law in the Chairman's reasoning.At the hearing of the appeal today, Miss Underhill has argued the case for Mrs Gaines, Mr Walker appeared in person to argue the case for himself and his company.The background to the dispute has to be gathered not just from the facts stated in the extended reasons, but also from the application submitted by Mrs Gaines and the appearance submitted by Mr Walker. The questions which Mr Griffiths, as Chairman, had to decide were whether there had been a transfer of an undertaking to Picturedrome Theatre Limited and, if so, whether Mrs Gaines was employed in the undertaking at the time of the transfer. The Chairman received no professional assistance in his efforts to answer those two questions. We sympathise with the position in which he found himself, in having to deal with points which can give rise to difficult problems on the interpretation and application of the Transfer of Undertakings (Protection of Employment) Regulations 1981 .At the hearing Mrs Gaines appeared in person. Mr Walker did not attend. His understanding was that it was not necessary for him to do so. The Chairman heard no evidence from him. His company was not represented. So that Chairman heard no legal submissions. Instead, the Chairman had to rely on the written representations set out in the Notice of Appearance dated 21st March 1995. It also seems from the extended reasons, that the Chairman did not have documentary evidence which must be in existence and be in the hands of Mrs Gaines or her former employers MGM, as well as in the possession of Mr Walker and his company, relating to the issues of transfer of undertakings.The question we have to decide is whether, on such facts as are available in the documents we have and in the decision, the Chairman made an error of law in his reasoning which led him to strike out the claim.The facts in outline are that Mrs Gaines was employed from 13th March 1986 until 10th December 1994 as manager of the Cannon cinema in Henleaze, Bristol. The cinema was leased from Waitrose (which is part of the John Lewis Partnership). The lessees and the employers of those who worked at the cinema were MGM. That lease expired on 8th December 1994. Mrs Gaines was dismissed by reason of redundancy with effect from 10th December 1994. She was paid her full redundancy entitlement. The cinema was then re-furbished and it was re-opened on 13th January 1995 under a different name, the Orpheus Cinema. Picturedrome Theatres had obtained a licence from Waitrose and. it appears, had subsequently obtained a lease. Although this is not stated in the Industrial Tribunal Chairman's decision, it seems that a licence was granted by Waitrose to Picturedrome to enable them to have access to the property to carry out refurbishment. That licence was granted on 21st December 1994. There were negotiations for a new lease which were not finally completed until 26th May 1995.It also appears that when the cinema was re-opened on 13th January 1995, some of the former employees of MGM at the Cannon cinema were employed by Picturedrome at the Orpheus Cinema. One of those who was not employed was Mrs Gaines. It is unnecessary to go into the details of conversations and meetings that took place between Mrs Gaines and Mr Walker and his staff. The position is that she is not employed by Picturedrome. The former assistant manager, Mrs Miles, has been appointed manager of the Orpheus Cinema.In those circumstances Mrs Gaines presented to the Industrial Tribunal on 9th March 1995 a claim that she had been unfairly dismissed from her position as manager with effect from 10th December 1994.The ground on which her claim was contested is simple and is set out in Mr Walker's Notice of Appearance which he prepared and signed. He said that Mrs Gaines was never employed by himself or by his company Picturedrome. Mrs Gaines had not been dismissed by them. In the sheet attached to the Notice of Appearance, he said this:
"(1) Mrs L.E. Gaines does not and has never been employed by either P. Walker or Picturedrome Theatres Ltd. She has not been offered employment either by P. Walker, Picturedrome Theatres Ltd, or any of it's representatives or employees.
(2) Neither P. Walker nor Picturedrome Theatres Ltd. have any connection with M.G.M. Cinemas Ltd. who were the previous lessees of the Cinema premises in Northumbria Drive, Henleaze, Bristol. Neither P. Walker nor Picturedrome Theatres Ltd. acquired the business or goodwill of MGM's interest in these premises which expired, we understand on 8th December 1994 or thereabouts. Further we understand that the contracts of employment with all employees including Notice of Redundancy was given by MGM and all employment contracts and redundancy benefit (s) duly honoured by them.(3) P. Walker and Picturedrome Theatres Ltd negotiated direct with the landlords of the premises in Northumbria Drive, Henleaze for a new lease of the cinema premises and are operating currently under licence (from January 13th 1995) pending preparation of a formal lease.(4) Picturedrome Theatres Ltd. made it known that they were to re-open the cinema on January 13th 1995 and invited staff to apply for vacancies including persons previously employed by MGM."He disputed the correctness of the assertion that P. Walker and/or Picturedrome Theatres:

""Took over" the premises from December 8th 1994."

Reference was made to the licence dating from 13th January 1995, and to the staff who Mrs Gaines referred to as being people who applied for employment and were offered contracts of engagement which would not compromise their redundancy benefits from MGM. Mr Walker gave further details of later events where there were discussions between him and Mrs Gaines in December. It is not necessary for the purposes of this appeal to examine the details.Those were the contentions on which the Chairman had to make a decision. He said correctly in paragraph 1 of the decision that, on a preliminary issue, he was required to decide whether or not Mrs Gaines was an employee with a contract of employment and, if so, whether or not she was entitled to pursue her claim for unfair dismissal. He sketched in the main facts, and quoted Regulation 5 of the 1981 Regulations. He came to these conclusions on the rival submissions which he summarised. He said:"5 ... it seems to me that the applicant was dismissed by reason of redundancy; she was paid her full redundancy entitlement on 10 December, and therefore by the time the business was taken on by Picturedrome Theatres Ltd she was not an employee of the transferor. Her employment contract did not survive so as to be a contract "which would otherwise have been terminated by the transfer"".His conclusions in paragraph 6 are these:
"6 It seems to me on the evidence in the Notice of Appearance that firstly there was no transfer of a business and secondly even if there were the applicant was not employed at the time of the transfer because she had previously been made redundant by MGM the transferor."
Is there a legal error in those two conclusions?Miss Underhill has argued the case in an outstanding presentation in an area of considerable legal complexity, outstanding for its conciseness and its clarity. We are indebted to her for the assistance that she has given to the Tribunal.Miss Underhill said, correctly, that in order to find whether there is a legal error, the first stage is to look at the Regulations made to implement the provisions of the Council Directive on Acquired Rights. She cited the relevant regulations. She referred to the interpretation of "relevant transfer" and "undertaking" in Regulation 2; to the provisions as to what is a "relevant transfer" in Regulation 3(1), (2) and (4). She referred us to Regulation 5(1), (2) and (3), and finally to Regulation 8(1) and (2).Miss Underhill said that the first question in the case was: was there a relevant transfer? She submitted that the Chairman had erred in law in adopting the wrong approach to answering this question. He appears to have decided that there was no transfer of a business, because the Cannon cinema had closed down on 8th December 1994 and did not re-open as the Orpheus Cinema until 13th January 1995. She said the relevant question, which the Chairman had not considered, was whether there was an economic entity, namely the undertaking of a cinema, which retained its identity in different hands? On that question she referred us to the head note in the recent decision of this Tribunal in Council of the Isles of Scilly v Brintell Helicopters and Ellis [1995] ICR 249 . The head note at page 250 provides an accurate summary of the more complex reasoning set out in the judgment of Morison J. The head note says:
"... in considering whether there had been a transfer of undertaking within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 1981 and Council Directive (77/187/E.E.C.), a tribunal should first identify the economic entity the relevant employees had been employed in before the alleged transfer, compare the activities, assets and staff before and after the transfer and, in the light of that analysis, ask whether the economic entity identified prior to the transfer could still be found; ..."
The Chairman had not considered the relevant question. He had not attempted to identify the relevant economic entity or made the comparison required between the activities before and after transfer to determine whether there was a relevant transfer.Miss Underhill submitted that the fact that there had been closure of the business in the period between 8th December 1994 and 13th January 1995 for the temporary purpose of repairs and refurbishment, did not prevent there being a relevant transfer. If a short period of closure did prevent there being a relevant transfer, that would deprive the Regulations and Directive of the effect that they were meant to have for the protection of employees in their jobs. On this aspect of the case, she referred to the decision of the European Court of Justice in Bork [1988] ECR 3057 . She referred to paragraph 8 which posed the question which arose in that case on the interpretation of the Directive. The question was whether the Directive applied:
"where the lessor of the buildings, plant and machinery used for the operation of an undertaking, after giving notice bringing the lease to an end or upon termination thereof and the undertaking's cessation of operations, retakes possession of the leased property and thereafter transfers it to a third party who shortly afterwards resumes the operation of the undertaking without engaging new staff, inasmuch as the transferee takes on again, without there being an agreement on the subject either with the former lessee or with the transferor or between those two parties, just over half of the employees who were employed in the undertaking by the former lessee?"
The short answer to the question was "Yes". The longer answer is contained in paragraph 20. The view of the European Court was the answer to the question was that:
"Article 1(1) of Council Directive 77/187 of 14 February 1977 is to be interpreted as meaning that the directive applies where, after giving notice bringing the lease to an end or upon the termination thereof, the owner of an undertaking retakes possession of it and thereafter sells it to a third party who shortly afterwards brings it back into operation, which had ceased upon termination of the lease, with just over half of the staff that was employed in the undertaking by the former lessee, provided the undertaking in question retains its identity."
The essential reasoning for that conclusion is contained in paragraphs 14, 15 and 16 of the judgment. In particular in paragraph 14 the Court said:
"The fact that in such a case the transfer is effected in two stages, inasmuch as the undertaking is first re-transferred from the lessee to the owner and the latter then transfers it to the new owner, does not prevent the directive from applying, provided that the undertaking in question retains its identity, as it does if it is a going concern whose operation is actually continued or resumed by the new employer, with the same or similar activities."
She pointed to an uncanny similarity between the facts of this case and the facts of the Bork case in paragraph 16 of the decision. The Court said:
"... it must be pointed out as the Court has already held in its judgment ... Ny Molle Kro [1987] ECR 3465, that the fact that the undertaking in question was temporarily closed at the time of the transfer and therefore had no employees certainly constitutes one factor to be taken account in determining whether a business was transferred as a going concern. However, the temporary closure of an undertaking and the resulting absence of staff at the time of the transfer do not of themselves preclude the possibility that there has been a transfer of an undertaking within the meaning of Article 1 of the directive. That is true, in particular, in circumstances such as those of this case, where the undertaking ceased to operate only for a short period which coincided, moreover, with the Christmas and New Year holidays."
It is well established that, because the 1981 Regulations were made by the United Kingdom government to implement the provisions of the Directive, interpreted by the European Courts decision in Bork , the 1981 Regulations must, so far as it is possible to do so, be interpreted by the United Kingdom Courts to be consistent with the Directive and interpretations of it by the European Court of Justice in Luxembourg.On the basis of that case, and on such facts as are available here, Miss Underhill argued that the temporary closure over the Christmas period and New Year period in this case, did not prevent there from being a relevant transfer. She submitted that on the material before the Chairman, there was no evidence that the business which opened on 13th January 1995 was a different undertaking than had previously been carried on by MGM. The only evidence was that it was a cinema and continued as a cinema albeit under a different name. On that aspect of the case, she referred to the press cutting from the Bristol Evening Post of 1st December 1994 which Mr Walker had attached to his Notice of Appearance giving an account of the circumstances in which the cinema was saved from closure by a last minute rescue by Mr Walker and his company.In those circumstances Miss Underhill's case was that the Chairman's conclusion on the first question was legally flawed.The second question was: when did the transfer take place?This is relevant to the application of Regulation 5. which provides that, if there is a relevant transfer, it does not operate to terminate contracts of employment of a person employed by the transferor or in the undertaking. It is provided in Regulation 5(3) that a reference to a person employed in an undertaking is a reference to a person so employed immediately before the transfer, including, where the transfer is effected by a series of two or more transactions, the person so employed immediately before any of those transactions. Miss Underhill submitted that a transfer can be effected by the termination of a lease, such as surrender and re-grant, as mentioned in Bork . On that reasoning she submitted that the expiry of the Waitrose/MGM lease on 8th December 1994 was one of the transactions constituting the transfer. Mrs Gaines was employed in the undertaking immediately before 8th December 1994. Her termination of employment did not take effect until 10th December 1994. Therefore Regulation 5 applied to protect her. She submitted that, on the true interpretation of Regulation 5(3), it is not necessary, as a matter of law, for the transferee to be a party to one of the transactions mentioned in Regulation 5(3). She submitted that, on that reasoning, the Chairman made an error of law in concluding that Mrs Gaines was not employed at the time of the transfer.Alternatively, she argued that, if the transfer did not take place until a later date, 13th January 1995 for example, which was the re-opening date of the cinema, and that was a date after the dismissal. Mrs Gaines was still entitled to succeed. She said that there was a legal error in the reasoning of the Chairman that Mrs Gaines was not employed at the time of the transfer, because she had previously made redundant by MGM. The relevant question, which was not considered by the Chairman, was whether the reason for the dismissal was the transfer or a reason connected with the transfer and was therefore unfair in accordance with Regulation 8, as interpreted by the House of Lords in Litster v Forth Dry Dock Co Ltd [1989] ICR 341 at 342. The head note is sufficient for the purposes of explaining our decision. The House of Lords held:
"... that the Regulations of 1981 were expressly enacted for the purpose of complying with Council Directive (77/187/E.E.C.) which provided for the safeguarding of employees' rights on the transfer of a business; that the courts of the United Kingdom were under a duty to give a purposive construction of the Regulations in a manner which would accord with the decisions of the European Court of Justice on the Directive and where necessary implying words which would achieve that effect; that there had to be implied into regulation 5(3) after the words "immediately before the transfer" the words "or would have been so employed if he had not been unfairly dismissed in the circumstances described by regulation 8(1);""
The case advanced by Miss Underhill was that Mrs Gaines was dismissed by reason of the expiry of the lease on 8th December 1994. The expiry of the lease was either part of the transfer or was connected with it. Therefore the dismissal was unfair within Regulation 8(1), as interpreted by the House of Lords, and the transfer did not operate so as to terminate Mrs Gaines contract of employment.In summary, there was an error of law in this decision, because the Chairman had not applied the correct test for identifying whether there was a transfer of an undertaking. If that test had been applied, that that would have led to the conclusion that there was a transfer. There was no evidence from which it was possible to conclude that there was no transfer. The decision to the effect that there was no transfer was perverse. There was an error of law also in that the Tribunal had mis-interpreted and misapplied Regulation 5. The Chairman had failed to consider whether the dismissal was for a reason connected with the transfer. He had failed to consider which transactions affected the transfer, so as to be able to identify correctly whether the appellant Mrs Gaines was employed immediately before the transfer.We have some sympathy with Mr Walker's reaction to these submissions. He said he found them overwhelming in the sense that, not that he was persuaded by them, but that he felt that he could not actually cope with arguing against them. He said that he was dumbfounded and was not able to add by way of legal argument anything to what Miss Underhill had deployed in her arguments. His position before the Industrial Tribunal was in his case as set out in the Notice of Appearance. He understood from the Tribunal that it was not necessary for him to attend. He repeated his main point, that there had not been a transfer. The steps taken by MGM on the expiration of the lease to make their employees redundant were nothing to do with him. The premises had not been transferred to him by MGM. He had not had dealings in relation to the lease of the premises with MGM. He did start to explain to us that there had been some dealings between him and MGM in relation to projection equipment, but we do not think it right for us to make any findings of fact about that. It is not our function to find facts.What has become clear to us in the course of this hearing is that Miss Underhill's criticisms of the decision and the legal approach taken by the Chairman to resolving the two questions he was asked to decide, was erroneous. We agree with Miss Underhill's submissions as to what is the correct approach to the questions in this case. We are unable however, to accede to Miss Underhill's primary submission that we should reverse the decision of the Chairman and substitute our own decision that there was a transfer of an undertaking in this case, and that Mrs Gaines was dismissed by reason of that transfer. We are unable to do that because, as Miss Underhill recognised, there is a serious shortage of facts in the decision. It is clear that the Chairman was in a difficult position with an unrepresented applicant and an absent respondent. He had not got the documents, or the oral evidence to make the necessary findings of fact which you would have to make if you were adopting the correct legal approach to resolving these problems. We are not critical of the Chairman. In fact, we are sympathetic to his predicament.It is clear that the only order we can make in the light of the force of Miss Underhill's submissions, is to allow the appeal. It was not legally correct to strike the case out for the reasons given by the Chairman. The case must be remitted to the Industrial Tribunal for the issues on this preliminary stage of the proceedings to be determined at a fresh hearing. It will be necessary for the Chairman at that hearing to take note of what we have said in this judgment about the correct legal approach to the questions. It will for him to decide what are the relevant facts which appear to him from the evidence and to which he must apply the relevant legal principles.In those circumstances, both parties deserve the sympathy of this Tribunal, in that a considerable time after this dispute erupted, a year ago, they are no further forward toward its resolution. They are back to square one. The only benefit that has been obtained is that we have given, we hope, an indication of the relevant questions, to ask the correct legal principles to apply and the facts to be investigated in order to decide Mrs Gaines's complaint against Mr Walker and his company.The only order is that we allow the appeal and remit the case to the Industrial Tribunal.