FLAIRMARK LTD v (1) MR K ALLEN (2) MR T J HALLIDAY (3) MRS V HALLIDAY [1999] UKEAT 484_99_2406

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [1999] UKEAT 484_99_2406Case No Appeal No. EAT/484/99Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
FLAIRMARK LTDAPPELLANT(1) MR K ALLEN (2) MR T J HALLIDAY (3) MRS V HALLIDAYRESPONDENT
Before
Mr Justice Charles Mrs M T Prosser Mr B M WarmanDate 24 June 1999
[1]APPEARANCES For the Appellant MR K SMITH (Representative) MR JUSTICE CHARLES : This appeal comes before us by way of preliminary hearing on which it is for the Appellant to demonstrate that the appeal raises reasonably arguable points of law. The parties to the proceedings when originally commenced were three Applicants, a Mr Allen, a Mr Halliday and a Mrs Halliday and the Respondent was a company called Flairmark Ltd. The appeal is against a decision of the Employment Tribunal, the Extended Reasons for which were sent to the parties on 4 March 1999.[2]The decision reached by the Employment Tribunal was a unanimous one by which they added a company called Meadridge Ltd as Second Respondents and allowed the application to proceed on the basis of a finding that there was sufficient continuity of employment. It was that issue which was the preliminary issue before the Employment Tribunal. Additionally they made some directions which were also sent on to the parties on 4 March and they were as follows:
"(1) That Meadridge Ltd be added as second respondent and be served with the Originating Applications of each applicant. (2) That the applicants do amend the Originating Applications to show their case(s) against both respondents. They shall present their amended Originating Applications in 14 days from 12 February 1999 and each respondent shall enter an appearance or amended appearance within a further 14 days thereof. (3) The hearing of all three applications is hopefully to be on 7, 8 and 9 April 1999 - which is a provisionally fixed date for hearing. All parties shall notify the Employment Tribunal within 7 days ie on or before 19 February that this date is (is not) convenient. If no notification is received the dates 7, 8 and 9 April will be treated as the definitive dates for hearing. (4) There is to be mutual discovery of documents in 21 days from today."
[3]We have been told by the representative of Flairmark Ltd and, as we understand it, Meadridge Ltd before us today, that the Applicants still maintain (possibly in the alternative) that they were employed by Flairmark and are pursuing a claim against Flairmark.[4]We were also told that Meadridge Ltd has now gone into liquidation. The Notice of Appeal is in terms that the Appellant, Flairmark, appeals from that part of the unanimous decision of the Employment Tribunal which ruled that Meadridge Ltd be added as Second Respondents. On the face of it, the appeal was therefore against the addition of Meadridge Ltd as Respondents.[5]In the skeleton argument that was put before us, it seemed that the thrust of the appeal (or a main point on the appeal) was not so much that the addition of Meadridge was wrong but that the decision to leave Flairmark as a Respondent was wrong and Mr Smith (the representative of the companies) confirmed in opening that that was his main complaint and that he was not asserting that the Employment Tribunal erred in law in adding Meadridge.[6]Having considered the position in the light of those submissions and the additional facts that we have set out, we have concluded that the potentially arguable points go wider than those asserted on behalf of the companies by Mr Smith. We set out below what in our judgment are reasonably arguable points that arise on this appeal.[7]Firstly, the point arises whether in reaching their conclusion in paragraph 7 of the Extended Reasons, that Meadridge Ltd took over the economic entity that was Durham Counters Ltd, the Employment Tribunal failed to take into account the letter in the bundle from the Official Receiver to the effect that the business of Durham Counters Ltd was not transferred. As to that, to make sense of it, perhaps I ought to mention that briefly the history is as follows:(a) all the Applicants were both employees, shareholders and directors of a company called Durham Counters Ltd which went into liquidation,(b) at and about that time Meadridge was formed and the Applicants became directors and employees of Meadridge,(c) it is at that stage that the Tribunal found, on the balance of probabilities, that the economic entity that was Durham Counters Ltd was taken over by Meadridge and thus, as we understand their reasons, the employment transferred, and(d) finally, Flairmark, shortly after these events, purchased the entire share capital of Meadridge with the result that Meadridge became a wholly-owned subsidiary of Flairmark.[8]The issues that arose before the Employment Tribunal were therefore, whether the Applicant employees transferred to Meadridge. Secondly, was their employment later transferred to Flairmark? Thirdly, if the undertaking did transfer to Meadridge or for some other reason the Applicant employees were employees of Meadridge, should Meadridge be added as a Respondent and fourthly, should Flairmark remain as a Respondent?[9]The relevant test for adding a Respondent is set out in Harvey , Division T, from paragraph 311 and, in particular, at paragraph 313 where reference is made, amongst other cases, Cocking and Sandhurst [1974] ICR 650 and the decision in Selkent Bus Company Ltd v Moore [1996] IRLR 661 .[10]Nowhere in their Extended Reasons do the Employment Tribunal mention the test that they are applying or which they have adopted. Additionally, in their Extended Reasons they refer to the definition of "Associated Company" which does not seem to us to be relevant. Further, as we have already said, the Employment Tribunal do not explain why they have concluded, on the balance of probabilities, that the business transferred to Meadridge, in the light of the letter from the Official Receiver, although very fairly Mr Smith told us that they did receive evidence from Mr Halliday to the effect that this is what happened but, as we have said, it does seem to us that there is either a " Meek point", or potentially a perversity point, as to this finding of fact.[11]Additionally, in our view the conclusions of the Employment Tribunal demonstrate some muddled thinking or potentially muddled thinking because, although at paragraph 10 of their Extended Reasons, they seem to make it clear that they have concluded that the continuity of employment is with Meadridge, they nonetheless leave Flairmark as a Respondent and make directions which seem to indicate that they thought that a claim might remain against Flairmark. That does not inspire confidence that they have applied the correct test.[12]We therefore propose to allow this appeal to proceed and on the ground that the following are arguable:(1) That the finding, albeit of fact as to the Transfer of the Undertaking from Durham Counters to Meadridge is one as to which the Employment Tribunal either failed to take into account the letter from the Official Receiver, or failed to explain how they had taken it into account.(2) That it is arguable that the Employment Tribunal did not apply the correct test to the addition of Meadridge as a Respondent, or alternatively did not properly explain their thinking as to why they have added Meadridge and(3) The Employment Tribunal have erred in law in leaving Flairmark as a Respondent and making Directions that a further case could be brought against Flairmark following the addition of Meadridge on the basis that the Applicants were employed by that company.[13]We will therefore direct that an Amended Notice of Appeal be lodged within 14 days of today. We make it clear that as leave to make that amendment has been granted ex-parte, it is open to the Respondents to the appeal to seek to set it aside on an inter-partes hearing.[14]We will categorise this appeal as Category B and give it a time estimate of half a day.