Brookes & 334 Ors v Borough Care Services & CLS Care Services Ltd [1998] UKEAT 210_98_0408

EAT
Brookes & 334 Ors v Borough Care Services & CLS Care Services Ltd
[1998] UKEAT 210_98_0408 · 1998-07-23
MR JUSTICE KIRKWOOD : This is an appeal by Mr Brookes and 334 others from a decision of an Industrial Tribunal at Manchester. The Industrial Tribunal (Chairman alone) heard the case on 25th and 26th November 1997 and promulgated its decision, and its reasons in extended form, on 16th December 1997.The Industrial Tribunal decided that there was not a relevant transfer of an undertaking for the purpose of the Transfer of Undertakings (Protection of Employment) Regulations 1981 ["TUPE"] between the first and second respondent in 1996.It is necessary for us to set out the material facts.Before 1992, Wigan Metropolitan Borough Council ["Wigan MBC"] managed a number of care homes for the elderly in the Wigan area. All the employees in this appeal were employed by Wigan MBC in that undertaking.In 1992, Borough Care Services Ltd ["BCS"], first respondent, was set up by Wigan MBC. It was a company limited by guarantee. In that same year, the care homes were transferred by Wigan MBC to BCS. That was a relevant transfer falling within TUPE. The appellants' employment was accordingly transferred to BCS who became their employer.CLS Care Services Ltd ["CLS"], the second respondent, is an industrial and provident society. We were told (and it is not controversial) that CLS exists to provide care for the elderly. It was established by Cheshire County Council in 1991 and took over the management of some 33 homes in Cheshire at that time. CLS does not have shareholders and seeks to achieve a surplus of income over expenditure only so as to improve the service it provides, and the terms and conditions of employment of its employees. At times material to this appeal, CLS had become entirely independent of Cheshire County Council.In November 1995, CLS learned of the intention of Wigan MBC and BCS to transfer the undertaking of the Wigan homes to the voluntary sector.We were told, and it was not contraverted, and the information was before the Industrial Tribunal, that CLS found the undertaking to be on a very unsound financial footing. It considered, however, that it could be put on to a sound financial footing. But one of the matters essential to that was re-negotiation of terms and conditions of employment of employees.CLS made a formal bid on 8th February 1996. The bid envisaged that CLS "would create a new statutory entity contract with the staff of BCS and with Wigan MBC".What that amounted to was the intention to form CLS (Wigan) Ltd, a new industrial and provident society, to which the undertaking of the Wigan homes would be transferred. It was envisaged that it would be a relevant TUPE transfer.The bid was accepted, and steps were being taken towards implementation of the transfer.On 28th March 1996, the Employment Appeal Tribunal gave judgment in Wilson v St Helen's Borough Council [1996] ICR 711 . That judgment was drawn to the attention of Mr Hursthouse, the Chief Executive of CLS, on 10th April 1996.It was understood by CLS that the effect of the decision in Wilson was that even a consensual variation of the terms of a contract of employment was precluded, and therefore invalid, in circumstances where the contract would, apart from TUPE, had been terminated by the transfer of undertaking and the transfer was the reason for the variation. Thus, CLS could not be confident that a binding agreement could be secured from BCS employees to change their terms and conditions of employment.Accordingly, the objective of putting the undertaking of the Wigan homes on a sound financial footing was in peril if the transfer route was followed.It was never the intention of CLS to take on the management of the Wigan homes itself.
"It was essential to provide CLS with the protection of a separate legal entity since the second respondent, CLS, was responsible for the running of other centres and organisations."
(Extended reasons para.

(a) )

It was therefore decided to follow what was described to us, for convenience, as the "share transfer" route. The members and directors of BCS would resign, CLS would become the sole member of BCS and the members of CLS would become directors of BCS.That was implemented.On 25th July 1996, the existing members of BCS resigned. CLS became the member of BCS. The existing directors of BCS resigned (save for the nominee of Wigan MBC). The members of CLS became the directors of BCS.Although, because of the personality of BCS, that was not strictly a share transfer, that is the way it was treated before the Industrial Tribunal and before us.
"The situation of a shareholding company was analogous and the use of a share transfer was used as a convenient descriptive label to give to the transaction which occurred in this case."

(Extended reasons para. 12)

"The Tribunal could find no distinction to be drawn between this situation and the situation where a company acquired 100% of the shares of another company."

(Extended reasons para. 16)

The Industrial Tribunal found that, thereafter, BCS continued to be a party to the agreement with Wigan MBC in relation to residents who were funded by the Local Authority; BCS continued to be the lessee of the 14 nursing homes from Wigan MBC under new leases which took effect from 25th July 1996; Wigan MBC's pre-purchase agreement in relation to day care services was always with BCS and never with CLS; BCS entered into contracts of insurance in relation to the 14 homes; BCS borrowed money to finance the refurbishment of the 14 homes: CLS guaranteed the loans and in addition made an advance of money to BCS; BCS and CLS were separately registered for VAT, and plainly had defined separate spheres of operation.The Industrial Tribunal further found that the appellants were employed by BCS to work in the business of BCS, and that continued to be the state of affairs after 25th July 1996. BCS and CLS each employed employees in its own undertaking, but a small number of employees worked for both undertakings and were jointly employed by BCS and CLS.The case for the appellants before the Industrial Tribunal was that, so far as the appellants were concerned, there had in reality been a change of employer. The membership of BCS, the directors (apart from the Wigan MBC nominee) and the Chief Executive were all from CLS. In order to give a purposive construction to TUPE, with the Acquired Rights Directive ["ARD"] (Council Directive of 14th February 1977 (77/187/EEC)), the Industrial Tribunal should look behind the usual consequences of the separate legal personalities of BCS and CSL to find who the employer really was. Approaching the case in that way, it would become apparent that there had in reality been a transfer of the undertaking of the Wigan homes from BCS to CLS.For the appellants, it was submitted to the Industrial Tribunal that it should hold:(a) that BCS and CLS were to be treated as a single economic unit;(b) that it was appropriate to pierce the corporate veil between BCS and CLS;(c) that BCS should be treated as acting as agent for CLS after 25th July 1996 and as employing the appellants as agents of CLS and not on its own behalf.The Industrial Tribunal gave the most painstaking consideration to the arguments advanced in support of these propositions (extended reasons paras. 14 to 22).Whilst it would overburden this judgment to set out paras. 14 to 22 in full, reference to some passages is necessary:
"15. ... The Tribunal considered the Acquired Rights Direction and the 1981 Regulations in order to establish the ambit of community law and national legislation and concluded that:- (a) The Acquired Rights Directive provided protection to employees in circumstances concerning a sale of a business of a company to a new owner. Likewise, the 1981 Regulations also provided protection for employees in these circumstances. Neither piece of legislation was drafted or intended to affect the case in relation to a sale of the share capital of a company to a new owner where the identity of the employer was unchanged. This was self-evident in the wording of the Acquired Rights Directive and the 1981 Regulations. (b) In the preamble to the Directive, reference was made to "transfers of undertakings, businesses or parts of businesses to other employees as a result of legal transfers or mergers" and referred to the need to provide for the protection of employees in the event of a change of employer, in particular, to ensure their rights are safeguarded. Articles 1, 2 and 3 of the Directive stated that the Directive was concerned with situations relating to transfers "to another employer". This was specified, in particular, in Article 1(1), Article 2(a), Article 2(b) and in Article 3(1). (c) The Transfer of Undertakings (Protection of Employment) Regulations 1981 likewise made it clear that what was envisaged was a transfer from one individual to another. This was self-evident in Regulation 3(1) and in the definition of a relevant transfer under Regulation 2(1). In Regulation 5(1) the Regulation specified the effect of relevant transfers on contracts of employment. It was plain that but for the Regulations such contracts would be terminated by reason of the transfer. These Regulations envisaged that there was a change in the identity of the person conducting the business since in the absence of a transfer there would be no question of contracts of employment being terminated. (d) The Directive and the 1981 Regulations drew the clear distinction between a situation where a company acquired the business of another company and the situation in which a company acquired the shares or members of another company. It was only in relation to the former situation that there was a transfer under the Directive and the 1981 Regulations. (e) ... (f) The Tribunal concluded as a matter of law that if the transaction was implemented by way of a share sale or by way of a membership change, the employees retained the protection of their existing contracts of employment. (g) ..."
"19.

(a) Control

The Tribunal concluded that the relationship that existed between the first and second respondents was no different from the relationship one would expect to find as between a company and its wholly-owned subsidiary or in relation to two companies where one was the major shareholder or majority shareholder of the other company. There was no doubt that the second respondent deliberately chose to structure business dealings in such a manner so as to avoid giving rise to a transfer under 1981 Regulations. The choice was made with the express intention of avoiding difficulties concerning a transfer which would or might be caught by the Transfer of Undertakings Regulations 1981. It did not appear to the Tribunal that this amounted to a basis upon which to found a claim that this amounted to a relevant transfer within the Transfer of Undertakings Regulations 1981. If the Regulations were held to apply in such circumstances the Tribunal concluded that this would be a radical extension of the 1981 Regulations which was not justified nor within the terms of the Regulations or the Acquired Rights Directive."
"20. ... The purpose of the Directive and the purpose of the Regulations was to protect employees against the adverse legal consequences of a change of identity of the employer conducting the undertaking which had not occurred here on the Tribunal's findings."
The Industrial Tribunal reached this overall conclusion:

"23. Conclusion

The Tribunal therefore concluded on a balance of probabilities that it was not appropriate to draw the conclusion that the case of these applicants should be treated as an exception to the general principle that there was a fundamental difference between acquiring the shares in a company (or acquiring the members of a company, a situation which does not give rise to a relevant transfer) and acquiring the business conducted by a company, which may give rise to a relevant transfer falling within the 1981 Regulations. The Tribunal was not satisfied that this was an exceptional case such as to allow the Tribunal to adopt any of the three arguments which were advanced by the applicants. The approach sought by the applicants involved a radical extension of the scope of the 1981 Transfer of Undertakings Regulations which was not sustainable in principle or on the precedent advanced. The Tribunal therefore concluded that there was not a relevant transfer of an undertaking falling within the 1981 Regulations. The undertaking in question had been conducted by the first respondent at all material times since the transfer in January 1992, and the Tribunal was satisfied that the first respondent still conducted that undertaking."On the ruling of the Industrial Tribunal, the appellants' contracts of employment remain in full force and effect. The appellants have that protection. But, if the appellants establish that there was a relevant TUPE transfer, it may be, it is was submitted to us, that the Regulations would afford to them greater protection.The appellants' case before us was founded on the proposition that the admitted purpose of BCS and CLS in proceeding in the way that they did was to avoid TUPE. That enabled the appellants to call on the tribunal to pierce the corporate veil and to look at economic reality.Regulation 3 of TUPE provide:
"(1) ... these Regulations apply to a transfer from one person to another of an undertaking ..."
Whilst there was here no transfer, in law, from one person to another, that is only so in this case if "person" is applied in a technical sense. The Regulations do not exclude, for example, share transfers. So went the submission.Construction must be purposive with ARD.It is necessary to begin with the preamble.
"Whereas economic trends are bringing in their wake at both national and Community level, changes in the structure of undertakings, through transfer of undertakings, business or parts of businesses to other employers as a result of legal transfers or mergers; whereas it is necessary to provide for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded ..."
"1 This Directive shall apply to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger."
It was submitted to us that "legal transfer" is a very wide concept and can be construed very widely. We should construe it in order to give effect to the purpose of ARD.It is legitimate, indeed necessary, to look at intention. Here, there was a deliberate intention to avoid TUPE. Counsel placed reliance upon the decision of the EAT (Morison J) in ECM (Vehicle Delivery Services) Ltd v B Cox & Others [EAT/27/96] . We were told that the judgment in that case was handed down in June 1998.Axial Ltd had a contract with VAG Ltd for the delivery of Audi and Volkswagen cars from Grimsby Docks. Axial lost the contract to ECM. The method of operation under the new contract with ECM differed materially from what had been done under Axial's contract. In the Autumn of 1994, it became clear to ECM that certain of Axial's drivers would take ECM to an Industrial Tribunal if ECM did not appoint them to posts within the ECM. That, the Industrial Tribunal had found, was a major reason why ECM had not appointed any ex-Axial workers.In the decision of the European Court of

Justice in Süzen [1997] ICR 663 , there was this passage:

"21. Since in certain labour-intensive sectors a group of workers engaged in a joint activity on a permanent basis may constitute an economic entity, it must be recognised that such an entity is capable of maintaining its identity after it has been transferred where the new employer does not merely pursue the activity in question but also takes over a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessor to that task."
Counsel for the appellants relied upon two passages from the judgment of Morison J in ECM :
"It can be said with confidence that neither the presence nor the absence of any one factor will demonstrate that a transfer of an undertaking has or has not occurred. It is a question of looking at the facts and keeping an eye on the purpose of the protection given by the Directive. To put it another way, the transfer of an activity is a necessary but not a sufficient condition for a transfer to occur; the transfer of staff, assets or goodwill is neither a necessary or a sufficient condition."
"In this case, on the tribunal's findings, the transferee did not take on the men precisely because they were asserting the Regulations applied and were threatening proceedings upon that basis. An obvious inference from these facts is that thereby the transferee hoped to defeat their claims. The question arises, therefore, whether it is possible for a transferee to call for the Regulations to be disapplied by refusing to take on the workforce. Another way of putting the point is that if the taking on or not of the workforce controls the application or otherwise of the Regulations, then the question at issue is circular. The issue as to whether employees should have been taken on cannot be determined by asking whether they were taken on.
It seems to us that we should adopt a purposive approach to the interpretation of the Regulations so as to give effect to the Government's obligations thereunder. We cannot and do not accept that it would be proper for a transferee to be able to control the extent of his obligations by refusing the comply with them in the first place."Accordingly, Counsel submitted, intention, and particularly intention to avoid TUPE, is a highly relevant consideration.Reliance was also placed on a passage of the European Court of Justice in Rockfon a/s v Specialarbejderforbundet i Danmark [1996] ICR 673 . That was a case on a wholly different Directive concerned with collective redundancies. It turned, essentially, on the meaning of the word "establishments" in the Directive in the context of the number of persons dismissed within a 30 day period as a proportion of the number of persons employed in the establishment.The short passage relied upon before us was at paragraph 30 of the judgment:
"30. ... an interpretation of the term "establishment" like that proposed by Rockfon would allow companies belonging to the same group to try to make it more difficult for Directive (75/129/EEC) to apply to them by conferring on a separate decision-making body the power to take decisions concerning redundancies. By that means, they would be able to escape the obligation to follow certain procedures for the protection of workers and large groups of workers would be denied the right to be informed and consulted which they have as a matter of course under the Directive. Such an interpretation therefore appears to be incompatible with the aim of the Directive."
We take no more from Rockfon than that it is legitimate to look at intention and that compatibility with the aim of the Directive is necessary in interpretation.Taking, therefore, the purpose of ARD, the relevance of intention and, in this instance, the admitted intention of CLS to avoid TUPE, the appellants submit that the Court should find a way through the legal, corporate arrangement, and the authorities allow such a way to be found.Adams v Cape Industry Plc [1990] 1Ch.433 was a case concerning enforcement of a foreign judgment. Cape, an English company, had a number of subsidiaries in mining in South Africa, and in marketing asbestos. The marketing subsidiary in the United State of America was a wholly owned subsidiary, NAAC, incorporated in Illinois. In 1974 a number of plaintiffs brought actions against Cape, NAAC and others in the American court, for personal injuries related to asbestos dust. The action was settled.A further group of plaintiffs began fresh actions, against Cape and others. Cape took no part, maintaining that the American court had no jurisdiction over Cape, and intent only on resisting in England the enforcement of default judgments against it in America. Meanwhile, and before the actions commenced, Cape had put NAAC into liquidation and made arrangements for its marketing in America to be by a newly incorporated Illinois company, CPC. There was a complex shareholding structure.Counsel for the appellants referred us to passages in the judgment of the Court, given by Slade LJ, at page 531G - 532F; 535C - G; 536A-H, 539D - 541A; 542A-G; 543G - 544G.The first part of the submission for the appellants is that the Court should regard BCS and CLS as a single economic entity.At page 532D, Slade LJ said:"There is no general principle that all companies in a group of companies are to be regarded as one. On the contrary, the fundamental principle is that "each company in a group of companies (a relatively modern concept) is a separate legal entity possessed of separate legal rights and liabilities:" The Albazero [1977] AC 774, 807, per Roskill LJ.It is thus indisputable that each of Cape, ... NAAC and CPC were in law separate legal entities. Mr Morison did not go so far as to submit that the very fact of the parent-subsidiary relationship existing between Cape and NAAC rendered Cape ... present in Illinois. Nevertheless, he submitted that the court will, in appropriate circumstances, ignore the distinction in law between members of the group of companies treating them as one, and that broadly speaking, it would do so whenever it considers that justice so demands. In support of this submission, he referred us to a number of authorities."At page 536F Slade LJ:
"Mr Morison described the theme of all these cases as being that where legal technicalities would produce injustice in cases involving members of a group of companies, such technicalities should not be allowed to prevail. We do not think that the cases relied on go nearly so far as this. As Sir Godfray submitted, save in cases which turn on the wording of particular statutes or contracts, the court is not free to disregard the principle of Salomon v A Salomon & Co Ltd [1897] AC 22 merely because it considers that justice so requires. Our law, for better or worse, recognises the creation of subsidiary companies, which though in one sense the creatures of their parent companies, will nevertheless under general law fall to be treated as separate legal entities with all the rights and liabilities which would normally attach to separate legal entities."
At page 537B:
"If a company chooses to arrange the affairs of its group in such a way that the business carried on in a particular foreign country is the business of its subsidiary and not its own, it is, in our judgment, entitled to do so. Neither in this class of case nor any other class of case is it open to this court to disregard the principle of Salomon v A Salomon Co Ltd [1897] AC 22 merely because it considers it just so to do."
In so far as it is a part of the appellants' submission in this case that, in appropriate circumstances, a court or tribunal can and should ignore the distinction in law between members of a group of companies, treating them as one whenever it considers that justice demands, that proposition is not in general supported by Adams . Counsel however stresses the words "save in cases which turn on the wording of particular statutes or contracts".The "single economic entity" argument was deployed unsuccessfully in Michael Peters Ltd v Farnfield [1995] IRLR 190 . That was a decision of the EAT concerning TUPE. In the course of the judgment of the EAT, Tucker J said:
"The Tribunal found that the four companies and the part of the group's assets and functions which were transferred were all part of one economic unit, whose business was to market design consultancy product branding and packaging design. They relied for this conclusion on the decision of the European Court of Justice in Hydrotherm Geratebau GmBH v Compact Del Dott Inq Maria Andrioli & Sas, 170/83 [1985] CMLR 224. That was a case concerned with Community competition law, where in the opinion of the Advocate-General Lenz an economic and not a purely legal approach in necessary. The 1981 Regulations with which we are concerned were made in order to implement Council Directive 77/187/EEC. As Browne-Wilkinson LJ observed in Berriman v Delabole Slate Ltd [1985] IRLR 305 at p.308, 17:
'The purpose of the Directive was "the safeguarding of employees' rights in the event of transfers", and the Regulations themselves include in their name the words "Protection of Employment".'
In our opinion it is not appropriate to apply a decision based on an economic approach to an employment situation. We do not consider it right to have regard to the concept of a single economic unit for the purposes of deciding the present case, and in our opinion the Industrial Tribunal were wrong to base themselves on the decision in Hydrotherm ."Tucker J then considered the arguments advanced by Counsel in the case and, at paragraph 18 of the judgment, said this:
"Whilst subsidiary companies have a legal entity, and clearly defined legal accountabilities, their ownership and ultimate accountability for performance and financial standards may well be vested in their parent company or group of companies."
Recognising that the decision in Peters was against her argument, Counsel for the appellants submitted that in that case the EAT was not referred either to Adams or to Dimbleby & Sons Ltd v National Union of Journalists [1984] ICR 386 .It is the second part of the submissions for the appellants that the Court should pierce the corporate veil.At page 539D of the judgment of the Court in Adams , Slade LJ said:"Quite apart from cases where statute or contract permits a broad interpretation to be given to references to members of a group of companies, there is one well-recognised exception to the rule prohibiting the piercing of "the corporate veil". Lord Keith of Kinkel referred to this principles in Woolfson v Strathclyde Regional Council , 1978 SLT 159 in the course of a speech with which Lord Wilberforce, Lord Fraser of Tullybelton and Lord Russell of Killowen agreed. With reference to the DHN decision [1976] 1 WLR 852, he said, at p.161:'I have some doubts whether in this respect the Court of Appeal properly applied the principle that it is appropriate to pierce the corporate veil only where special circumstances exist indicating that it is a mere facade concealing the true facts.'"At page 540C:
"If and so far as the judge intended to say that the motive behind the new arrangements was irrelevant as a matter of law, we would respectfully differ from him. In our judgment, as Mr Morison submitted, whenever a device or sham or cloak is alleged in cases such as this, the motive of the alleged perpetrator must be legally relevant, and indeed this no doubt is the reason why the question of motive was examined extensively at the trial."
At page 544B:
"Mr Morison submitted that the court will lift the corporate veil where a defendant by the device of a corporate structure attempts to evade (i) limitations imposed on his conduct by law; (ii) such rights of relief against him as third parties already possess; (iii) such rights of relief as third parties may in the future acquire. Assuming that the first and second of these three conditions will suffice in law to justify such a course, neither of them apply in the present case. It is not suggested that the arrangements involved any actual or potential illegality or intended to deprive anyone of their existing rights. Whether or not such a course deserves moral approval, there was nothing illegal as such in Cape arranging its affairs (whether by the use of subsidiaries or otherwise) so as to attract the minimum publicity to its involvement in the sale of Cape asbestos in the United States of America. As to condition (iii), we do not accept as a matter of law that the court is entitled to lift the corporate veil as against a defendant company which is the member of a corporate group merely because the corporate structure has been used so as to ensure that the legal liability (if any) in respect of particular future activities of the group (and correspondingly the risk of enforcement of that liability) will fall on another member of the group rather than the defendant company. Whether or not this is desirable, the right to use a corporate structure in this manner is inherent in our corporate law. Mr Morison urged on us that the purpose of the operation was in substance that Cape would have the practical benefit of the group's asbestos trade in the United States of America without the risks of tortious liability. This may be so. However, in our judgment Cape was in law entitled to organise the group's affairs in that manner and ... to expect that the court would apply the principle of Salomon v A Salomon Co Ltd [1897] AC22 in the ordinary way."
In this instance it is specifically accepted by the appellants that the corporate arrangements adopted were not a mere facade concealing the true facts. We have in mind, too, the finding of the Industrial Tribunal:
"In this case, the Tribunal was not satisfied on a balance of probabilities that the use of the first respondent was a mere facade. The conduct of the undertaking via the first respondent had a deliberate and genuine commercial intent quite independent of the 1981 Regulations."
The appellants' case is that CLS adopted the structure it did to evade(i) limitations imposed on its conduct by law, and(ii) such rights of relief against it as third parties already possess. The limitation imposed on its conduct was said to be the precluding of re-negotiation of terms and conditions of employment even by consent.We are unable to discern any present limitations that CLS sought to avoid. There was no question of CLS seeking to evade any obligations in respect of the appellants' contracts of employment. We read the first test assumed by the Court of Appeal in Adams for the purpose of the argument there, as referring to presently existing limitations. In so far as the appellants' argument before us relates to circumstances which, although presently foreseeable, have not yet arisen, it is akin to the third test proposed in Adams by Mr Morison and rejected by the court.The submission that the structure was adopted to evade such rights of relief against CLS as third parties already possess is untenable. None of the appellants already possessed any rights of relief against CLS. Rights of relief might conceivably arise in the event of any subsequent breach of the contract of employment. The rights of the appellants were to the protection of their contract of employment which, by the structure adopted, CLS had ensured would continue.A further authority relied upon by the appellants on the corporate veil point was the Dimbleby case. That was a decision of the House of Lords in entirely dissimilar circumstances and in the context of interlocutory relief. In it (at p.409G) Lord Diplock said:
"My Lords, the reason why English statutory law, and that of all other trading countries, has long permitted the creation of corporations as artificial persons distinct from their individual shareholders and from that of any other corporation even though the shareholders of both corporations are identical, is to enable business to be undertaken with limited financial liability in the event of the business proving to be a failure. The "corporate veil" in the case of companies incorporated under the Companies Act is drawn by statute and it can be pierced by some other statute if such other statute so provides; but in view of its raison d'être and its consistent recognition by the courts since Salomon v Salomon Co Ltd [1897] AC 22 , one would expect that any parliamentary intention to pierce the corporate veil would be expressed in clear and unequivocal language. I do not wholly exclude the possibility that even in the absence of expressed words stating that in specified circumstances one company, although separately incorporated, is to be treated as sharing the same legal personality of another, a purposive construction of the statute may nevertheless lead inexorably to the conclusion that such must have been the intention of Parliament."
Counsel for the appellants stressed the last sentence of that.Does a purposive construction of TUPE lead inexorably to the conclusion that Parliament intended that BCS is to be treated as sharing the same corporate personality as CLS? The findings of the Industrial Tribunal as to the different spheres of operation of the two companies immediately militate against that.It is, we understand, widely recognised that a transfer of shares, as distinct from a transfer of business, is outside the scope of TUPE and, indeed, the ARD. Yet it is to the contrary that the appellants are really arguing in this case. The undertaking of the Wigan homes, though in law remaining with BCS, were in reality transferred to members of BCS, namely CLS.That argument is contrary to the fundamental principle that a company is a separate legal person with its own identity, distinct from its members. Further, it leads to other fundamental difficulties. For example, does the argument extend not just to a 100% transfer of shares but to a simple majority transfer?The Regulations and the Directive refer quite specifically to the change of employer and to a transfer and transferee being any natural or legal person. They could have addressed, but did not, the circumstance in which there was no transfer from a legal person to another legal person, but the shareholding membership of the legal person changed though its separate legal identity remained untouched.The conclusions we reach on this appeal are:- The appellants were employed by BCS before and after 25th July 1996.- The undertaking of the Wigan homes was with BCS before 25th July 1996 and remained with BCS after 25th July 1996.- In determining with whom the appellants were in a contract of employment it is necessary to look at legal entities. In that, the single economic entity argument is neither appropriate nor helpful.- The authorities do not support the argument for piercing the corporate veil and the appellants have not begun to establish that the court could probably do so.- The Industrial Tribunal considered this case carefully and thoroughly and the appellants have failed to demonstrate to us that it made any material error of law.Accordingly, this appeal is dismissed.