Kavanagh v Coral Racing Ltd & Anor [1997] UKEAT 231_97_0805

EAT

Kavanagh v Coral Racing Ltd & Anor

[1997] UKEAT 231_97_0805 · 1997-05-08

MR JUSTICE LINDSAY: We have before us an appeal by Mrs A Kavanagh against the decision of the Industrial Tribunal under the chairmanship of Mr J N Leonard, a decision which was promulgated on 15 January 1997. It was a decision on a preliminary point.

On some illegible date Mrs Kavanagh launched an originating application against Coral Racing Ltd. She claimed unfair dismissal, unfair selection for redundancy, sex discrimination and also for relief in relation to breach of transfer of undertaking, protection of employment regulations and wrongful dismissal and breach of contract. That was a claim directed only to Coral Racing Ltd.

At some stage, it has to be assumed, those claims, or some of them, were also then made against a second Respondent, Videcom Security Ltd and both Coral and Videcom Security entered appearances to Mrs Kavanagh's claims.

Whilst the mechanism by which it came to exist is not clear to us, the position arose that a preliminary issue was raised for hearing apart from and ahead of the main body of Mrs Kavanagh's claims and that preliminary issue is dealt with in paragraph 1 of the Industrial Tribunal's extended reasons. What they say there is this:

"This was a preliminary hearing conducted in order to determine against which of the two respondents Mrs Kavanagh's complaint should proceed. Essentially that depended upon determining whether or not the undertaking, or part thereof, in which the applicant was employed (or in which, but for her dismissal, she would have been employed) was transferred so as to constitute a relevant transfer within the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 1981."

On this appeal only Mrs Kavanagh, as Appellant and Videcom Security Ltd, as Respondent to the appeal, are concerned.

The Industrial Tribunal sets out the relevant facts which, in order for our judgment to make sense, need briefly to be set out. They found that Mrs Kavanagh commenced her employment with Coral on 26 March 1984 and that she continued without interruption until her dismissal on 15 September 1995. She worked as a services supervisor. Videcom were held to be a company offering a specialist service to the betting industry. What they do is process security micro film and to a high specification identify faults on the processed film. The Industrial Tribunal said that it was a process inaccurately called "film processing", that Coral had carried that out for themselves but they had only a limited expertise. It was the same activity carried out by Videcom but Videcom carried it out to a higher skill level. They say:

"It was work which had been carried out by a number of workers in the department supervised by Mrs Kavanagh and which occupied part of her time and duties. It was not the only work which was carried out by her or which could be required of her under the terms of her contract of employment."

The Industrial Tribunal went on that the Coral company entered into an agreement with Videcom by which the activity of film processing would be transferred and they went on to say that that part of Coral's undertaking was transferred to Videcom and then they say:

"It was not a part of their undertaking to which, at the date of the transfer in September 1995, Mrs Kavanagh was assigned. Although it occupied a significant part of her time (her estimate was 80%), it was not the principal task which she was contracted to perform. Her role was, primarily, a managerial and supervisory role and carried a salary appropriate to that, those managerial tasks continued to be performed by the 1st respondents after the film processing had been transferred to the 2nd respondents, albeit that they may have been greatly reduced in scope."

We shall later look to the law upon which the Industrial Tribunal directed itself but its conclusion was given in its paragraph 5 as follows:

"By applying the facts of this case to the law, we have no difficulty in reaching the conclusion that there was a relevant transfer of part of the 1st respondents undertaking, namely that part concerned with film processing. It was an important part of the 1st respondents' undertaking, one which had an economic identity with workers, resources and equipment. It was an activity which they chose to entrust, by contract, to the 2nd respondents. The same activity continued after the transfer, with the same equipment, much as it had done before, except that it was being conducted by a different organisation in a different place. Equally, we have no difficulty in concluding that Mrs Kavanagh was not an employee assigned to the part transferred. She occupied a managerial role and although, in practice, she devoted a substantial amount of her time to tasks connected with film processing, that was not her only, or even her main, responsibility. She was also expected to and did perform other tasks and responsibilities which were not transferred to the 2nd respondents. It was those other responsibilities which justified the managerial role and commensurate salary.

6. Accordingly, there can be no liability for the dismissal of Mrs Kavanagh attaching to the 2nd respondents who are hereby dismissed as parties to these proceedings. The issue remaining for decision by the Tribunal must be heard on a separate occasion, on a date which will be notified to the parties."

To return to the law, there were, in effect, two chief questions in front of the Industrial Tribunal. The first is this: was there a relevant transfer of part of the Coral business and if so, secondly, was Mrs Kavanagh, an employee, assigned to that part. As will be seen, the use of the word "assignment" follows from the meaning which has been given by the European Court of Justice in effect amplifying or saying what direction is to be intended by the words in Transfer of Undertakings (Protection of Employment) Regulations 5(1):

"employed ... in the part transferred"

One is to ask, was the employee assigned to that part?

As to those two questions, there is no difficulty whatsoever as to the first question. There was held to be a relevant transfer and that is not put in issue in this appeal. But Mrs Kavanagh's notice of appeal, which has been developed with admirable brevity by Mr Ford on Mrs Kavanagh's part, says at paragraph 6:

"The grounds upon which this Appeal is brought are that the Tribunal misdirected itself in fact and in law in finding that the Applicant was not assigned to the part of the first respondent's undertaking that was transferred to the second respondent."

On that question, the second of the two questions which we have identified, the Industrial Tribunal gave itself this direction:

The ECJ in Botzen v Rotterdamsche Droogdok Maatschappij BV (Case 186/83) held that the Directive was to apply only to persons assigned to the part transferred in the sense that they worked wholly or very substantially in that part. It would be necessary, if the Regulations were to apply, that the employee should form a part of the economic entity being transferred and not merely providing a service, even a substantial one, to it. It would not apply in the case of an employee who could also be required to, and did, perform a significant amount of work in other parts of the employers undertaking and which were not transferred."

That is what the Industrial says that the Botzen case says. But does the Botzen case say that? It is undoubtedly easier to discern what Botzen says is not the test for assignment than to discern what Botzen says is the test for assignment. In the Botzen case, which is to be found at Common Market Law Reports 1986, page 50, Sir Gordon Slynn, as he then was, as Advocate General, said at page 52:

"I do not consider that it is necessary or desirable in this case to seek to define comprehensively what is meant by 'part of' a business. That is largely a question of fact, though it will usually involve the transfer of a department or factory or facet of the business. It may perhaps also involve the sale of a fraction of a single unit of business. Once it is decided as a fact that part of the business is transferred, then those workers who during working hours are wholly engaged in that part are entitled to rely on the terms of the directive. It will of course cover the full-time and part-time workers. A basic working test, it seems to me, is to ask whether, if that part of the business had been separately owned before the transfer, the workers would have been employed by the owners of that part or by the owners of the remaining part. The only exception I would admit to the requirement that an employee must be 'wholly' engaged in that part of the business would be where an employee was required to perform other duties to an extent which could fairly be described as de minimis . On the other hand, if a worker in fact is engaged in the activities of the whole business or in several parts then he cannot be regarded for the purpose of the directive as an employee 'of' the part of the business transferred."

So that at that stage the recommendation to the ECJ was a test of exclusive employment in the part save only for an exception where the other duties were de minimis.

However, as will be seen in a moment, that approach was conspicuously not adopted by the Court itself. At page 57 of the report, after citing Article 3(1) of the Directive 77/187, the Court continued in a passage that I need to set out at length:

"In that connection, Rotterdamsche Droogdok Maatschappij claims that only employees working full-time or substantially full-time in the transferred part of the undertaking are covered by the transfer of employment relationships, to the exclusion of those engaged in partial tasks in various businesses or parts of businesses and those who, although working for several businesses or parts of businesses, form part of the remaining staff.

On the other hand, the Commission considers that the only decisive criterion regarding the transfer of employees' rights and obligations is whether or not a transfer takes place of the department to which they were assigned and which formed the organisational framework within which their employment relationship took effect.

The Commission's view must be upheld. An employment relationship is essentially characterised by the link existing between the employee and the part of the undertaking or business to which he is assigned to carry out his duties. In order to decide whether the rights and obligations under an employment relationship are transferred under Directive 77/187 by reason of a transfer within the meaning of Article 1(1) thereof, it is therefore sufficient to establish to which part of the undertaking or business the employee was assigned.

The answer to the second and third questions must therefore be that Article 3(1) of Directive 77/187 must be interpreted as not covering the transferor's rights and obligations arising from a contract of employment or an employment relationship existing on the date of the transfer and entered into with employees who, although not employed in the transferred part of the undertaking, performed certain duties which involved the use of assets assigned to the part transferred or who, whilst being employed in an administrative department of the undertaking which has not itself been transferred, carried out certain duties for the benefit of the part transferred."

The ruling of the Court on page 58 is to the same effect.

Leaving aside the difficulties in ascertaining from the decision itself what components the Court had in mind as amounting to an assignment of an employee to a part of an undertaking, it is clear from the Court's use of the phrase "on the other hand" in paragraph 14, that RDM's claim in that case that only employees working full-time or substantially full-time in the transferred part were covered by the transfer of employment was rejected as being not the whole description of the test that was to be applied. Something different to that test could suffice and could be taken to indicate that an employee was assigned to the particular part transferred.

It seems to us, therefore, that when in their directions to themselves the Industrial Tribunal here said that"

"the Directive was to apply only to persons assigned to the part transferred in the sense that they worked wholly or very substantially in that part" (emphasis added)

that that cannot have been a proper direction from a reading of the Botzen case. In other words, the Industrial Tribunal misdirected itself as to the effect of the directive. They gave themselves a test as to the meaning of "assignment" which is not the test that Botzen recommends. It is, in fact, perhaps the only test that Botzen clearly rejects.

Coming to the directions that the Industrial Tribunal gave itself in relation to TUPE Regulations, it held:-

"It would be necessary, if the Regulations were to apply, that the employee should form a part of the economic entity being transferred and not merely providing a service, even a substantial one, to it. It would not apply in the case of an employee who could also be required to, and did, perform a significant amount of work in other parts of the employers undertaking and which were not transferred."

The Industrial Tribunal referred to no authority as substantiating those two views that it then added. It may be doubted if any authority states quite as baldly as does the Industrial Tribunal that it cannot suffice that the employee provides a substantial service to the economic entity transferred. Equally, one would doubt whether any authority can be found to say as baldly as does the Industrial Tribunal here that the regulations would not apply to an employee who could be required to perform and who did perform a significant amount of work in parts of the employer's undertaking not transferred in addition to his or her work in the parts that were transferred. Both of those considerations will undoubtedly form part of the many factors that need to be considered in an overall judgment upon whether there is or is not an "assignment" of an employee to a part but neither is necessarily determinative, as the Industrial Tribunal's language in that paragraph which we have cited seems to indicate.

We have been briefly referred to the Duncan Webb Offset (Maidstone) Ltd v Cooper & Others case [ 1995] IRLR 633 . There was reference in the written argument to Sunley Turriff Holdings Ltd v Thomson & Others

[1995] IRLR 184

and we have been taken this morning to Buchanan-Smith v Schleicher & Company International Ltd

[1996] ICR 613

. None of those can be regarded as authority for the propositions advanced by the Industrial Tribunal in the two sentences at the foot of the passage which we have cited. Sunley Turriff shows, amongst other points, that it is not necessary for an employee to be employed full-time or substantially full-time in the part transferred, so long, at any rate, as he or she can properly be regarded as assigned to that part. Guidance on the difficult topic of what it is that is the proper test for assigning and what components are to be borne in mind in deciding whether there has been an assignment or not is given in the Duncan Webb case at page 635 and further in the Buchanan case at page 622 and in the continuing passage from page 622F.

It seems to us that there is an error on the part of the Industrial Tribunal in the case before us in relation to the sense to be given to the word "assign". Moreover, it is, as it seems to us, a point central to the case. Even if the law as to which the Industrial Tribunal directed itself as to the Regulations had been clear and beyond contention, there would still be real doubt as to what law the Industrial Tribunal had had in mind, either its incorrect view of the meaning of the Directive, or its less contentious view of the Regulations. But here the view that it seems to take of the Regulation, though not perhaps as plainly in error as that view that it expresses in relation to the Directive, does nothing to displace the error which is revealed as to the word "assign". When the Industrial Tribunal says that:

"we have no difficulty in concluding that Mrs Kavanagh was not an employee assigned to the part transferred"

we have to presume that what they had in mind was the very sense that they had given to the word "assigned" only 10 or 15 lines earlier and that is the sense that is incorrect for the reasons that we have explained. It is no escape for Videcom to say that, even if the direction which the Industrial Tribunal gave itself as to the word "assign" was wrong, that the judgment can nonetheless stand because it is plain that the Industrial Tribunal did not follow its own direction. One cannot be sure here that they did not follow their own direction. Their decision in the case is consistent with their following their own misdirection but taking the position that an 80 percent engagement in the part transferred was not an engagement "very substantially" in that part, which was part of the meaning that they had given to the word "assign". In other words, one cannot be sure that the error of law played no part in the Industrial Tribunal's arrival at its conclusion.

There is here, in our view, an error of law. The Industrial Tribunal gave itself a misdirection which it cannot be said that it then did not apply. Mr Choudhury, who with equal brevity and force, acted here for Coral, has drawn attention very properly to the fact that it seems that the Industrial Tribunal had, indeed, had in mind considerations other than merely looking at whether Mrs Kavanagh was wholly or very substantially assigned to the part transferred. Nonetheless, for the reasons we have given, one cannot be sure that the misdirection was not in their minds when they concluded, as they did. We do not say that the Industrial Tribunal's conclusion was necessarily wrong. It may be that even if they had properly directed themselves in law they could have come to the same conclusion, but it is not for us to speculate what the result would have been had they given themselves the correct direction on the law. The error of law renders the Industrial Tribunal's conclusion unsafe. Accordingly, we set aside the decision of the Industrial Tribunal.

The formulation of a preliminary point has, unfortunately, and it is not unusual in that respect, proved not to be the short cut which, no doubt, it was intended that it might be. It has proved to be a long and, no doubt, expensive detour. Rather than remitting the matter for a fresh hearing only on the preliminary point, we see the better course as remitting the matter to a full hearing, not merely on the preliminary point, but for the judgment to proceed on the whole case and with the second Respondent remaining party as a Respondent to the case.