Gardner Merchant Ltd v Ryan & Ors [1996] UKEAT 1337_95_0507

EAT
Gardner Merchant Ltd v Ryan & Ors
[1996] UKEAT 1337_95_0507 · 1996-07-05

JUDGE HULL QC :

This is an appeal to us by a catering firm, Gardner Merchant Ltd, against a finding of the Industrial Tribunal sitting for London South on 20 July 1995. The Tribunal was presided over by Mr Baron and he had two industrial Members with him.The complaints to the Industrial Tribunal were made by three ladies, a Mrs Ryan, a Mrs Gayle and a Mrs Keenleyside. They had been employed by Gardner Merchant Ltd in a canteen in the Central Office of Information. The Central Office's headquarters or, at any rate, an important office of the Central Office, are at Hercules House, which is in Hercules Road SE1.Employment in the canteen at that large office began in 1985 as far as Mrs Ryan was concerned, in 1988 as far as Mrs Gayle was concerned and in 1989 so far as Mrs Keenleyside was concerned.There were various services provided by the canteen. There was a restaurant canteen service in which you could go and on a self-service basis take a meal or a snack, pay for it and go and sit down at one of the tables. There was, in addition, a trolley service, as it has been called, in which one of the ladies used to take a trolley round the building, selling for cash light refreshments and so on and there was a special service which was provided when there were meetings, as one often sees in such organizations. A meeting would wish to refresh themselves from time to time, so it might be a lunch or it might be other refreshments, and these would be brought by one or the other of these canteen ladies to the meeting. There were a good many such orders, apparently, and quite regularly. That was what was being provided there.The activities at the material time with which we are concerned were carried on at first by a civil service organization, one of many organizations now which are carried on for civil service purposes, called Forward Catering Services and there came a time on 15 November 1993 when Gardner Merchant took over, if I can call it by a neutral word, the "franchise" of the canteen, which included all the services which I have mentioned. They were found by the Industrial Tribunal to be all one undertaking. There was no separate trolley service as a separate undertaking or anything of that sort. The entity could be called, loosely, "the canteen", in fact the business entity was more completely described by the Industrial Tribunal.There came a time, as the Industrial Tribunal found, when Gardner Merchant found the franchise which they had won, in a competitive tender exercise, unprofitable and unsatisfactory to them and they therefore wrote terminating it. I must refer now to what the Industrial Tribunal said. After setting out that there was a transfer of the undertaking within the Transfer of Undertakings (Protection of Employment) Regulations 1981 when Gardner Merchant took over from Forward Catering, they referred to the facts. Apparently, Gardner Merchant put in a Mrs Cankteen who was the supervisor. The three ladies who were Applicants to the Industrial Tribunal continued as they had before doing various jobs in providing the canteen services and the business then continued; but it came to a time on 6 July 1994 when Mr Forbes, who was a manager with Gardner Merchant, wrote to Mr Clark of the Central Office of Information (COI) in the following terms:
"We refer to the arrangement for catering services at the Central Office of Information, Hercules Road, and hereby give you notice to terminate such arrangement with effect from the close of business on Friday 29th July 1994."
A full reply was sent on 21 July from the Central Office:
"We hereby acknowledge and agree to your decision explained in your letters (sic) of 6 July 1994 to withdraw from the Staff Restaurant contract rather than except (sic) my offer of proposing revised terms. In giving our agreement, we retain any rights to compensation that we might have.
...In the light of the TUPE regulations, you will be interested to know that it has been decided to close the restaurant and not to relet the contract."That was clearly a statement that so far as the Central Office was concerned the restaurant was to be closed and the undertaking, so to speak, would therefore come to an end.The word "interested", "you will be interested to know", had in effect a double meaning because quite clearly if the writer of that letter was correct in what appears to be his intention, he was saying:
"These ladies, the staff and so on, will be your responsibility because the business, the undertaking, will not be transferred. We shall not be carrying it on. We shall close the restaurant"
. That was what was said by Central Office. No doubt that was one of a very large number of matters which had to be considered when the Industrial Tribunal came to consider the problems, which they did.They go on to say:
"On 19 July, [two days before that letter] COI decided to close the canteen with effect from 29 July, and not appoint a new contractor in place of GM."
They refer again to the letter.On 20 July, Ms Kemp, a senior personnel manager with Gardner Merchant, saw the Applicants and gave them a memorandum confirming that Gardner Merchant were withdrawing and saying that their employment would transfer to the new contractor or to the Central Office if a new contractor had not been appointed by 1 August. In addition she thanked them for their hard work.One would have thought, and it is only a comment, that before handing that memorandum to the ladies concerned, Gardner Merchant would have confirmed that that was so and in view of the letter to which we have just referred, one would think that they would have got a very dusty answer from the Central Office; but, nonetheless, without taking the elementary precaution of making sure that that would, so to speak, "be all right with the Central Office", that unilateral attitude, if I can call it that, was adopted.By an exchange of correspondence in July, Mr Forbes of Gardner Merchant told Mr Clark of the Central Office that any redundancy liability would be that of Central Office if the canteen were closed. At the end of that paragraph the Tribunal say that:
"Mr Williamson replied on 3 August 1994 ... saying that as the canteen was closed, there was no undertaking to be transferred."
They refer to a memorandum on 27 July in which Mr Williamson said that the decision to close the staff restaurant had been taken and he told the members of the staff about that and there were arrangements put in place, to some extent, for closing the canteen. There was to be a small kitchen equipped for the use of outside caterers and there were certain other provisions. Those, it was found by the Industrial Tribunal, and there is no appeal against that part of the decision, were no substitute for, were not a carrying on of the undertaking.On 29 July the canteen was, indeed, closed and the three ladies who applied to the Industrial Tribunal left at about 4.30 pm, handing over their civil service passes, which they needed to get into the building. On 1 August the position, as I say, being completely at odds between the Central Office and Gardner Merchant, there was a little pantomime, it might be called, in which they all presented themselves for work and were turned away. That was on the advice of the trade union and, with the matter being in doubt, it was probably exceedingly sensible to go through that little ceremony, because it would show, if the matter were in doubt, that the three ladies were ready and willing and able to carry on with their job in the canteen, should it be the responsibility of either Gardner Merchant or the Central Office to carry it on and that, therefore, if neither would employ them, they could say with truth, as the Industrial Tribunal found, that they had in fact been dismissed. At any rate, that is what happened.Again, quite inconsistently with the contention that the undertaking had been transferred, Mrs Cankteen, the supervisor, went off with Gardner Merchant and was found a fresh place elsewhere shortly thereafter. They did not, apparently, say "We are handing over our undertaking and presumably you will wish to keep Mrs Cankteen", or anything of that sort, so far as the Industrial Tribunal findings go.It was in the light of these facts that the three ladies presented their complaints to the Industrial Tribunal. They joined no fewer than three Respondents. There was Central Office, there was Gardner Merchant, whom they put first and foremost in the line of their claims, for they said that Gardner Merchant were their employers at the time of their dismissal; and also the Treasury were joined. In due course the Treasury were dismissed from the case by consent.The complaints were of unfair dismissal, on the basis (as the Industrial Tribunal found) that the ladies had not been consulted about losing their jobs and other matters, which one would expect if they were to be dismissed, for the Industrial Tribunal found that they had, indeed, been dismissed. They wanted redundancy payments. They were entitled by contract to something better than the statutory scheme of redundancy payments. They wanted pay in lieu of notice and various other incidental matters under the Wages Act and the Industrial Tribunal had to consider that. It sat and it heard evidence from the parties. The Tribunal had to go into the matter, as they did with very great thoroughness. Their reasoned decision occupies more than 13 closely typed pages and we have, of course, read it with great interest.They set out the case. Mr Korn of counsel, who appeared for Gardner Merchant in front of them, argued that there had been a relevant transfer of either the whole or part of the undertaking within the meaning of the 1981 Regulations and the contrary was put by the Central Office of Information. The Tribunal then referred to the various statutory provisions and to the Transfer of Undertakings (Protection of Employment) Regulations 1981 and they correctly set them out. They discussed and set out the issues which they found arose and they said, among other things, that:
"The essential issue is what happens if a client or customer who has used an outside contractor to perform a service to its employees decides to close down that service? Does the liability to make the ensuing termination and redundancy payments rest with the contractor or with the client or customer? The importance of this question to [GM] is obvious."
They looked into the facts. They referred to authorities and one can summarize the authorities in this way: that what matters is the substance of the transaction. Was an entity which can properly be called an undertaking, a business, transferred, as a question of fact? The Tribunal is not so concerned about the legal steps by which that result takes place. The Transfer of Undertakings Regulations, I must refer to them very shortly, say at regulation 3:
"(1) Subject to the provisions of these Regulations, these Regulations apply to a transfer from one person to another of an undertaking situated immediately before the transfer in the United Kingdom or a part of one which is so situated."
It can be put very simply, was there or was there not a transfer of an undertaking? An undertaking, of course, does not consist merely of tools or premises, equipment, nor does it consist simply of employees. One has to look and say whether there was an undertaking here. It is common ground that what was being carried on by Gardner Merchant at Hercules House was an undertaking. Then the question is, was it transferred? The authorities show that it matters not, or is likely not to matter, exactly how that is done. In some cases, of course, there is a proper vending agreement by which a business is sold. The goodwill is transferred, assets are transferred, all sorts of provisions are made with regard to tax, balance sheets and so forth. In other cases it may be entirely informal, for example, a small cafe may be handed over with nothing more than an assignment of the lease and the employee or employees may find that their employment continues under a new proprietor. What has to happen is that, as I say, the Industrial Tribunal must look at all the facts and decide whether, in truth, there has been a transfer of the undertaking.Here it is said, of course, that there was a transfer. That is what Gardner Merchant was asserting throughout and that was a pure question of fact. There may be cases in which, for example, an undertaking is carried out on premises which are let to the person carrying on the business. His lease may be surrendered or may come to an end by lapse of time and the business may cease for a short while and then the premises may be reopened so that perhaps a week after or a few days after, another business, or the same business it may be, opens in the premises. Has there been a transfer of the undertaking? If one finds that in the premises, after these changes, it is the same business which is being carried on, the same undertaking, then it has been transferred and it matters not that one can say, "Well, I suppose over the weekend or during the week when it was closed, it might be said technically to have been transferred to the landlord and then the new tenant carried it on afterwards". One must look at the reality and see whether the business which is carried on is the same business. If it is, then on the face of it, after a short lapse of time, there has been transfer of the undertaking.In the present case what the Tribunal had to do was to consider whether, on all the facts, the undertaking, although it closed down 29 July, was in fact transferred to the Central Office. Clearly, it might have been. When Mr Forbes wrote his letter, of course it might have been, if one read the whole letter and looked at all the facts, quite clearly saying, "We are transferring the undertaking to you" and the facts might have shown that that was so and that the undertaking being transferred had, indeed, been closed down by the Central Office, perhaps after a little thought. That was a matter for the Industrial Tribunal. It is a pure question of fact for them to say whether there has been a transfer and so we have to look and see what they found.They set out that Mr Korn, for Gardner Merchant, argued that when the canteen closed the responsibility for the staff in it reverted to the Central Office of Information. (We would just say that the Tribunal had earlier found that there was no evidence that the staff were ever employed by the Central Office. They had been employed, as we say, by Forward Catering Services.)That was the contention which was made and what Mr Nicholls has said to us today is that because, clearly, these ladies were civil service employees, therefore it is quite clear that they were employed by the Central Office of Information. With respect, we think that is about as complete a non sequitur as one could have. The civil service carries on many undertakings of the sort which we have indicated and the Industrial Tribunal found expressly that there was no evidence that they had previously, before Forward Catering Services took over, been employed by the Central Office. They considered the cases to which we have been referred and they said, having considered various matters:
"... the Tribunal finds that there was no transfer of the undertaking (being the whole of the operation carried out by GM [Gardner Merchant] at Hercules House) from GM to COI [Central Office of Information]. The Tribunal feels reinforced in this decision by the fact that there was no suggestion by GM that Ms Cankteen would be transferred to COI, although she was in the same position as the three Applicants for all material purposes. The Tribunal therefore rejects the first argument of Mr Korn that COI is liable to the employees by virtue of there having been a transfer of the whole of the undertaking."
Then there were submissions made with which we are not concerned, how parts of the undertaking could be considered separately (the trolley service and so on) and then they found, and again there is no challenge to this, that, in fact, each of the Applicants had been unfairly dismissed. Clearly, if they had been dismissed it was unfair in the view of the Industrial Tribunal because the ladies were not consulted and no attempts were made in the redundancy situation which arose to find them alternative employment and so on.The Tribunal considered this, as we say, with great patience and care, as it seems to us that they reached a decision which was clearly open to them. We would say that most of Mr Nicholls' argument, with great respect, assumed everything that, in fact, he had to prove before the Industrial Tribunal. It is no good to continue to tell us about the importance to the employees of the Transfer of Undertakings Regulations operating, the fact is that if the Transfer of Undertakings Regulations do operate then, of course, the responsibility is cast upon the person to whom the undertaking is transferred. If, on the other hand, there is no transfer of the undertaking, then the responsibility remains on the person who is surrendering the concession to deal with their employees properly and in accordance with law and fairly, under the Employment Protection (Consolidation) Act. The question is not whether there are duties, as there certainly are, to such employees but who is to discharge those duties?We have listened very carefully to Mr Nicholls' arguments. It seems to us that a great many of them start with the assumption that there has been a transfer and explain to us the importance of it and how it is worked out. Certain assertions of fact which were made by Mr Nicholls we do not accept and, in particular, we cannot go behind the findings of the Industrial Tribunal for the simple reason that it is not alleged that those findings were perverse and we do not have in front of us the notes of evidence, which would certainly be asked for if such an averment were made. Our jurisdiction is simply limited to matters of law. Having heard Mr Nicholls as carefully as we can, we still cannot see any error of law in the findings of the Industrial Tribunal and most certainly we cannot say that there is any error here which would entitle us to interfere.In those circumstances the appeal to us must fall to be dismissed.