PLAYLE & OTHERS v (1) CHURCHILL INSURANCE LTD (2) CGA GROUP LTD (3) CGA DIRECT (INSURANCE BROKERS) LTD [1999] UKEAT 570_98_1509

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [1999] UKEAT 570_98_1509Case No Appeal No. EAT/570/98Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
PLAYLE & OTHERSAPPELLANT(1) CHURCHILL INSURANCE LTD (2) CGA GROUP LTD (3) CGA DIRECT (INSURANCE BROKERS) LTDRESPONDENT
Before
Mr Justice MorisonDate 15 September 1999
[1]APPEARANCES For the Appellants MR T LINDEN (of Counsel) Messrs Osborne Clarke Solicitors 50 Queen Charlotte Street Bristol BS1 4HE For the Respondents MR M FODDER (of Counsel) Instructed By: Mr G Freer Messrs Barlow Lyde and Gilbert Solicitors Beufort House 15 Botolph Street London EC3A 7NJ MR JUSTICE MORISON: This is an appeal from a decision of an Industrial Tribunal held at Brighton. The Tribunal consisted of the Chairman sitting alone. He found that there was no transfer of an undertaking from CGA Group Limited and CGA Direct (Insurance Brokers) Limited to the first Respondents, Churchill Insurance Limited, so that the five applicants, who were employed by Group Co, had no valid complaint of unfair dismissal against Churchill, the alleged transferee. Churchill is and was an insurance company licensed to carry on business as such. They market and sell their own policies which they underwrite. The CGA Group comprised an insurance company, CGA Direct, which was not licensed to trade as such, a firm of insurance brokers and an offshore re-insurance vehicle with which this case is not directly concerned. When an prospective insured wanted to obtain cover, CGA Brokers would write the risk, pursuant to a binding authority, on behalf of two third party insurers who would then re-insure 50% of the risk through the CGA offshore reinsurer. It would appear that the policy of insurance would be described as a CGA policy. The policies were managed by the CGA group who would settle claims on behalf of the insurers and re-insurers. By this means, the insured risk would be shared equally between the third party insurer and the CGA Group. The CGA operation was not a success, in the long term. In March 1997 the learned Chairman found as a fact that the CGA business had a customer base in excess of 100,000 policies and that, in reality, all the companies within the group operated as one business. In that month receivers were appointed and, following negotiations, with parties represented by lawyers, a sale agreement was negotiated with Churchill for a consideration of £6 millions, and on 24 March 1997 the transfer took place.[2]The Tribunal Chairman found that CGA's portfolio was of great attraction to Churchill because of its size and because the profile of CGA's customers "was extremely complementary to Churchill's own core customers .... and an acquisition of the portfolio would provide Churchill with a customer group which would not normally have been available to them through mainstream advertising." Churchill wanted to establish a direct relationship between the CGA customers and themselves, so that, at renewal, the customer would insure with them. It was represented to the customers and suppliers, after transfer, that it was "business as usual" and that Churchill had taken over CGA's business. Churchill took over the run-off in relation to the CGA policies, and managed them until renewal. It was accepted by both parties to the contract of sale that TUPE applied to the sale transaction. As we understand the findings, of 215 staff employed by CGA, 75 were employed by Churchill to enable continuity to be provided in relation claims and customer services and of those 75, 27 were taken on permanently, the rest having left after Churchill staff had become familiar with the CGA computer systems. CGA's software was loaded into Churchill's hardware.[3]There are no findings of fact in relation to the individual applicants' positions save that Mr Hill is referred to as the Chief Executive and there is a passing reference to Mrs Beadle.[4]The Chairman asked himself whether the CGA undertaking was transferred so that it retained its identity in the hands of Churchill, applying the test in the well known case of Spijkers [1986] ECR 1119 . He referred to the later decision of the European Court in Süzen [1997] ICR 662 and to the court of Appeal's decision in Betts v Brintel Helicopters [1997] ICR 792 and to the passage in Lord Justice Kennedy's judgment which distinguishes between those cases where the same staff re engaged in the same activity before and after the transfer and other cases, where there needs to be a more wide ranging inquiry. He concluded that this was a case falling into the latter category. He accepted that the agreement by Churchill to handle the run-off could be an indication of a transfer but considered that "overall" the nature of the two businesses was inherently different, that what Churchill was essentially concerned with was the acquisition of CGA's customer lists. He concluded:
"On balance, having regard to the criteria referred to in Betts the operation of what was transferred was not actually continued or resumed by Churchill, nor did they carry on the same or similar activities."
[5]The arguments of counsel may be summarised in this way.[6]Mr Linden made 3 principal submissions on behalf of the appellants. That the tribunal Chairman erred in law in considering that as Churchill was a direct insurer and CGA were a broker, there could be no continuation of activities after the transfer. That the Chairman's finding there was no transfer was perverse given the factual background to the matter in particular the transfer of goodwill from CGA to Churchill. That the Chairman erred in failing to consider the appellant's alternative submission made at the hearing that, if nothing else, the part of CGA concerned with the management and administration of its policies was transferred to Churchill.[7]The Chairman effectively found that because Churchill was carrying on the CGA business as part of its direct insurance business there could not have been a relevant transfer. In making that finding the Chairman had placed too much emphasis on the literal wording of the judgment in Spijkers , in particular the following passage:
"the term transfer implies that the transferee actually carries on the activities of the transferor as part of the same business."
[8]It was argued that the mere fact that a transferee was different in nature to the business which it acquired did not mean that it had not acquired the business entity. Neither Spijkers nor Betts intended to establish a principle that there cannot be a transfer of a business between businesses which were different from each other. The question was not whether the transferee and the transferor performed identical functions but whether the entity which transferred to the transferee retained its identity.[9]In any event, it was submitted that the Chairman's findings with regard to the continuation of CGA's activities were perverse. The Chairman also failed to consider the evidence that Churchill sought to assimilate CGA with 'seamless continuity' and allow CGA's insurance business to continue like 'business as usual'.[10]Mr Fodder supported the findings of the tribunal Chairman and submitted that there had been no error in law. The question of whether there had been a transfer of an economic entity was one of fact and as there was no perversity present in the decision, this Court could not interfere with the decision.[11]Mr Fodder very properly accepted that the tribunal had not dealt with Mr Linden's alternative submission that there had been a specific transfer of the management and administration departments. He did not accept, however, that the Chairman made an error of law in its approach to the matters dealt with in the judgment.[12]We are of the view that the decision of the Industrial tribunal cannot stand. It appears that it has overlooked an important part of the appellant's case, namely that a specific part of the business was transferred, even if the whole transaction did not amount to a transfer. This was a point which was argued and should have been considered. Further, we agree with the submission that the Tribunal appears to have approached the question of a transfer by concentrating on the differences between the two businesses, which is not helpful. In our view the tribunal should start by looking at the sale agreement so that it can identify precisely what was being transferred. Where both parties are represented by competent solicitors, the terms of the agreement themselves may cast some light on the issue whether the Transfer Regulations apply. It would appear that in this case both parties contracted on the basis that the regulations did apply. That fact alone cannot determine the question at issue, but it is a relevant factor to be weighed in the balance. Finally, this was a decision of a Chairman sitting alone. He was entitled to do so, but it cannot be over-stressed that the wisdom and input of the Lay Members is important. If, as is the case, the question whether there has been a transfer of an undertaking is a mixed question of fact and law, the Lay Members can make an important contribution to the decision.[13]Having reached our conclusion, the question arose as to whether it would be better to refer the case back to the same Tribunal or to remit it to another one for a new hearing. In all the circumstances, we are of the view that it would be fairer for both parties if the matter was re-considered by another tribunal, with lay members. Remission back to the same tribunal can lead to a suspicion, whether well founded or not, that the tribunal will be anxious to justify its original conclusion. A hearing before a full panel is what should have occurred in the first place [and we do not in any way criticise the Chairman for proceeding as he did, since neither party asked for a full panel]; we think that this is what should now happen.[14]Accordingly, the appeal is allowed and the matter remitted back to a freshly constituted Employment Tribunal, in accordance with this judgment.