INDUSTRIAL SERVICES GROUP LIMITED v (1) MR S MATTINSON & OTHERS (2) INTERSERVE INDUSTRIAL SERVICES LTD [2003] UKEAT 1238_01_3001

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2003] UKEAT 1238_01_3001Case No Appeal No. EAT/1238/01Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
INDUSTRIAL SERVICES GROUP LIMITEDAPPELLANT(1) MR S MATTINSON & OTHERS (2) INTERSERVE INDUSTRIAL SERVICES LTDRESPONDENT
Before
Mr Justice Rimer Mr I Ezekiel Mr P R A JacquesDate 30 January 2003
[1]APPEARANCES For the Appellant MR D BROWN (of Counsel) Instructed by: Messrs Morgan Cole Solicitors Bradley Court Park Place Cardiff CF10 3DP For the 1st Respondent For the 2nd Respondent MS J BROWN (of Counsel) Instructed by: Messrs Rowley Ashworth Solicitors 247 The Broadway Wimbledon London SW10 1SE MR D WALKER (of Counsel) Instructed by: Messrs Dundas & Wilson Solicitors 191 West George Street Glasgow G2 2LD THE HONOURABLE MR JUSTICE RIMER This is an appeal by Industrial Services Group Ltd ("ISG") against part of a decision of an Employment Tribunal, chaired by J R Nicol, sitting at Carlisle on 11, 12 and 13 June 2001, their extended reasons being promulgated on 31 August 2001. ISG is represented by Mr Damian Brown, who also appeared before the Employment Tribunal. The respondents to the appeal are, first, Mr S Mattinson and others, who were applicants before the Tribunal. They are represented by Ms Jillian Brown, who also appeared before the Tribunal, and they all support the appeal. The other respondent to the appeal is Interserve Industrial Services Ltd ("IIS"), which resists the appeal. IIS is represented by Mr David Walker of D & W, IIS's solicitors, and he too appeared before the Tribunal.[2]The decision by the Tribunal which is challenged on this appeal is that there was no transfer of an undertaking between ISG and IIS within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("the 1981 Regulations"). ISG's case is that the Tribunal appear to have arrived at their conclusion without first taking due account of all the matters they should have taken into account and, as a result, misdirected themselves on the resolution of the issue. It asks that we should quash the Tribunal's decision and, in the papers submitted to this Appeal Tribunal, it invited us, if the appeal were to be successful, to remit the issue to a differently constituted Employment Tribunal for a re-hearing. We should point out, however, that in his closing submissions, Mr Brown for ISG asked us not to do that if we were otherwise with him, but to decide the question ourselves. That is because an agreed statement of facts was before the Employment Tribunal, and he says we are in as good a position as was the Employment Tribunal to decide the matter.[3]In contrast to that position, IIS's case is that there is no basis for a conclusion that the Tribunal misdirected themselves and that their decision should therefore be upheld. At the conclusion of the oral evidence before the Tribunal, the parties agreed, as we have mentioned, a statement of facts for use by the Tribunal and a copy was supplied to them. In setting out the facts which follow, we have drawn primarily on this. We should explain that as the parties had agreed such a statement, the Tribunal made it clear in paragraph 4 of their extended reasons that they did not regard it as necessary to recite the facts in detail, nor did they. The facts[4]The dispute arises out of events in the year 2000 at the British Nuclear Fuels PLC ("BNFP") nuclear plant at Sellafield, Cumbria. BNFP was engaged in various major construction works there. The dispute related to a project at the plant known as the Drypac project, which was for the construction of a large building for the treatment of nuclear waste. The main contractor in the first phase of the project, the civil construction phase, was Robert McAlpines ("McAlpines"). That phase commenced in about 1995. McAlpines used a number of subcontractors and, of course, it used scaffolding in the erection of the building.[5]ISG is primarily a specialist scaffolding contractor on large construction contracts. It is normally involved in projects divided into a number of phases such as civil construction, mechanical construction and commissioning or finishing, and the Drypac project was just such a project. On 11 March 1998, BNFL Engineering Limited ("BE"), a subsidiary of BNFP, awarded ISG the contract for the provision of scaffolding and cleaning services in the Drypac project. This contract related to the second phase of the project, the mechanical construction phase. ISG was not awarded any contract during either the first phase or the third phase of the contract, the last being the commissioning/finishing phase.[6]ISG commenced work on site on about 19 March 1998. In order to perform its obligations under its contract, it required, as the statement of facts identified:(1) scaffolding tubes, board and related materials,(2) cabins and toilet facilities for staff use,(3) a forklift truck,(4) two minibuses to transport staff, 5) a vehicle to transport scaffolding, (6) The permission of BE to carry out the works, (7) administrative staff in addition to scaffolders and cleaners, and (8) safety clearance. ISG did not use any of the scaffolders which had been employed by McAlpines on the civil construction phase. It commenced work on its contract using its own employees to provide the scaffolding services. There were approximately 1,800 scaffolds on the Drypac site in early 2000. The cleaning part of its contract was the cleaning of the outside of the Drypac building. Initially it subcontracted these cleaning services to a third party, but later it used its own employees, employing some ten cleaners.[7]It is now necessary to turn to consider how and when IIS came on to the scene of the Drypac project. UK Construction and Engineering Limited ("UKCE") is or was a company which in early 2000 specialised in mechanical construction and maintenance work. It was also a contractor on the second, mechanical construction, phase of the Drypac project. In February 2000, BE, the main contractor on that phase, also entered into discussions with UKCE regarding the proposed finishing contract on the project, one which BE had not yet placed, a contract relating to the third phase. UKCE produced a list of proposed subcontractors for this contract if it was to be given the contract. The list included ISG for scaffolding works. ISG did not know that it was on such a list.[8]FK Multi-Services Ltd ("FKM") specialised in providing multi-disciplinary services, including scaffolding and painting. In early 2000, it was involved in another, unconnected, Sellafield project known as the Box Encapsulation Project, for which it provided scaffolding services.[9]By May 2000, a decision in principle had been made for the amalgamation into one company of UKCE and FKM, later carried into effect in August 2000. On 22 May 2000, UKCE asked FKM to provide a tender for scaffolding support for the finishing contract. At a meeting held on 29 June 2000, it was recorded that there were to be no nominated subcontractors on the finishing contract, only domestic subcontractors. These were to include FKM in place of ISG.[10]On 3 July 2000, BE informed ISG that its contract on the mechanical construction phase would be terminated on 31 August, subject to a safe and efficient closedown of activities. This was confirmed in writing, and indeed the contract was formally terminated on that day. BE's expressed concern for terminating the contract was the progression towards awarding a finishing contract, although neither the applicants before the Employment Tribunal nor ISG accepted that this was either the true or the only reason. Mr Walker, ISG's managing director, confirmed that the contract could be terminated on four weeks' notice. ISG continued to be paid for its services and it was duly paid for all of them. Since 18 April 2000, when ISG had had a total of 78 employees on the project, the number of its employees on it had reduced. As at 24 July 2000, it had a total of 68 employees on the project, including ten cleaners and two secretarial staff. From then onward, ISG's employees on site continued to reduce in number, until on 24 October 2000 it had only one. This was Mr Butler, ISG's senior site supervisor, who remained at Sellafield until May 2001, after which he moved to an ISG project in Wales. To the extent that ISG retained staff at Sellafield after 31 October, they were retained there because ISG was engaged in other projects there.[11]IIS was created on 1 August 2000. It was the corporate result of the proposed amalgamation of UKCE and FKM, and also of another entity called Clough Williams Power. IIS was a wholly owned subsidiary of Douglas Group PLC, later renamed Interserve PLC. The purpose behind the amalgamation was so that IIS could offer an integrated multi-disciplinary package for project or maintenance contracts. IIS provided a wider range of services than ISG.[12]BE awarded the finishing contract to IIS, although the contract was not signed until 31 August 2000. IIS was to provide a variety of services including all aspects of pipe work, plant and equipment, electrical instrumentation, in addition to support services to the commissioning team. These services included the provision of scaffolding for access purposes. Paul Sykes of IIS was responsible for the supervision of this contract. His duties involved supervising the removal of the ISG cabins, two minibuses for ISG staff, a vehicle for transporting scaffolding and the ISG forklift truck.[13]All of ISG's employees on the project applied for jobs with IIS on the finishing contract. IIS also recruited ISG's former project manager, Mr Reynolds, to work for it on a project in Southampton. Prior to IIS's incorporation in 2000, FKM has asked ISG to release 12 employees to it in order to start work on the finishing contract on about 31 July. By 1 August, 12 former ISG scaffolders were working for IIS on the project, and ISG's employees on the project were down to 63. On 7 August, IIS took on a further nine former ISG's scaffolders, reducing the number of ISG employees on site to 54. On 9 September, IIS took on eight more former ISG scaffolders, by which time the number of ISG employees on site was down to 27.[14]All ISG employees who went to work for IIS filled in application forms and were selected by IIS's management. ISG provided references for them. IIS employed the scaffolders on the terms of the same national conditions as had applied to their employment with ISG. It also employed on the finishing contract five former FKM scaffolders who had worked on the Box Encapsulation Project. IIS did not employ any cleaners: cleaning under its finishing contract was subcontracted to BET Management Services (Commercial and Industrial) Ltd.[15]IIS, with the agreement of BE and ISG, also continued to use, for the purpose of the finishing contract, the standing scaffolding which had been erected by ISG. It took over the scaffolding on short-term hire and IIS hired between 200 and 350 scaffolds in this way. This was eventually dismantled by IIS in December 2000. By the end of October 2000, IIS had reduced the number of scaffolders employed by it on the project to around 21. It paid ISG £27, 891.55 in hire charges for scaffolding hired by it between September and December 2000. It also purchased some scaffolding from ISG, for which it paid ISG £17,514, that scaffolding including an access way over a railway line. In addition to the hire and purchase of this scaffolding, IIS also used its own scaffolding and its own cabins, equipment and vehicles.[16]The agreed facts record that during what they refer to as the "handover period from ISG to [IIS]", Mr Walker of ISG raised the matter of the 1981 Regulations with Mr Teal of IIS. Mr Teal's view was that they did not apply. The agreed facts do not record Mr Walker's view on the point. ISG paid redundancy and notice payments to all its former employees. The handover meetings resulted in IIS receiving safety documentation required to utilise any scaffolding erected by ISG. The Tribunal's Decision[17]The Tribunal did not, as we have said, recite the facts as we have done, but referred in their reasons only to those matters they regarded as necessary for an understanding of their decision. By way of preliminary findings before addressing themselves to the particular issue which has led to this appeal, they explained that the applicants were or had been all employed by ISG on the Drypac Project. They found that each of the three phases of the project related to a different type of activity, but also that these activities overlapped so that there was no clearly defined changeover between the various contractors. They found that ISG had no contract for the first or third phases, but that it did some work for the contractors on both of them. They found that ISG's only contract was to provide services to, or at the direction of, BE, the main contractor on the second phase. They found that ISG did not take on by transfer any employees of the previous contractors on the project. They found that IIS was the main contractor on the third phase and that its contract was not with BE but with BNFP, the parent of BE. The Tribunal referred to the fact that IIS was an amalgamation of companies and found that in performing its third phase obligations:
"It used its own resources or a direct sub-contractor to provide services that were equivalent to those which might have been previously undertaken by [ISG]"
They found that, although ISG was not awarded any contract for the third phase, it was still involved with other contracts at Sellafield.[18]The issue before the Tribunal which has led to this appeal was dealt with by way of a preliminary one. It was, as both the applicants and ISG asserted, whether there had been a transfer, under the 1981 Regulations, of an undertaking between ISG and IIS, and with it an automatic transfer of ISG's employees. The Tribunal recorded that they considered first whether there was an undertaking capable of being transferred and they recorded that the only contention being advanced was that there had been a transfer of ISG's operations in relation to the Drypac Project, not the whole of ISG's undertaking. They said, in paragraph 10 of their extended reasons: …. "Under the relevant contract, [ISG] provided scaffolding and cleaning services. The options appeared to be either that there was not an entity capable of being transferred, that there was an entity consisting of all services provided by [ISG] or that either or both of the services provided constituted an entity."[19]In directing themselves as to the answer to the question before it, the Tribunal considered the nature of ISG's and IIS's operations in relation to the project. They dealt first with the scaffolding part of ISG's operations. They found that ISG derived its revenue from, as the Tribunal put it, "doing something with scaffolding". Under its second phase contract, ISG erected scaffolding on the site for which it charged, that charge covering an initial period while the scaffolding was in place, and later it charged a higher fee for the hiring fee for the scaffolding so erected. The Tribunal found that the sale of scaffolding was not an important part of ISG's operations, but that it did sell some of the scaffolding on the site to IIS, mainly some scaffolding forming the bridge to which we have referred. The Tribunal found that the sale was more economic from BNFP's viewpoint, since otherwise it would have had to pay higher charges to ISG or else have the scaffolding dismantled and new scaffolding erected in its place. It found that ISG's sale of the scaffolding was voluntary on its part and was not imposed on it by its second phase contract.[20]The Tribunal referred also to the other equipment that ISG had on site in addition to scaffolding, namely vehicles, cabins and ancillary facilities. All of this remained in the ownership of ISG. But IIS not only bought some of ISG's scaffolding, it also hired from ISG the scaffolding which ISG had erected, rather than dismantle and replace it. Surplus scaffolding was moved to other ISG projects. The Tribunal found that:
"12. …[ISG] employed various grades of scaffolders and supervisors together with some support staff. In due course, [IIS] provided equivalent equipment and employees to the extent that was required at that stage of the work." …. "15…..Although [IIS] was working on a different phase and with different contractors, the essence of the work was the same [as that done by ISG under its contract] in that both [ISG and IIS] provided the quantity and type of scaffolding required for others to use and maintained it whilst it was erected. The work of scaffolders was the same for both [ISG and IIS]."
The Tribunal referred to the receipt by IIS of the documents, including safety records that were necessary to ensure the continued safe use of the scaffolding it had bought and hired from ISG. They found that, although a major part of ISG's scaffolding operation at Sellafield was to do with the Drypac project, it was also involved with other unrelated projects there. They found that its scaffolding operations were not exclusively for the purpose of the Drypac project.[21]The Tribunal then turned to the cleaning services. They found that Mr Butler, who was in charge of ISG's scaffolding operations, also supervised the cleaning operations. They found that ISG had originally subcontracted this work but had then used its own employees for it, and that these employees were allocated exclusively to such work. They recorded that some of the contractors' employees had obtained work with ISG, but that:
"it did not appear that there had been a transfer of employees at the time"
The Tribunal found that when IIS "took over the cleaning services" from ISG, it approached the task differently, although the work was substantially the same. They found that IIS used both a sub-contractor and also some directly employed labourers, who were also engaged in other duties.[22]The Tribunal unanimously found as follows in paragraphs 21 - 24, which we propose to read verbatim, notwithstanding the length of those paragraphs:
"21 On the basis of the evidence presented in this case, the Tribunal unanimously finds that there was not an undertaking within the meaning of the Regulations, which transferred from [ISG] to [IIS] even though [IIS] may have had equivalent responsibilities to [ISG]. [ISG] did not transfer tangible assets to [IIS], other than certain records that were handed over and a limited amount of scaffolding that it sold in due course after a period during which hiring charges were paid to [ISG]. [ISG's] other scaffolding that [IIS] used also provided income for [ISG] until it ceased to be used and was taken elsewhere for use by [ISG]. Surplus scaffolding was removed and used elsewhere by [ISG]. Apart from this, [IIS] did not acquire any premises, vehicles or other equipment from [ISG]. [IIS] did not acquire any goodwill or tangible assets from [ISG]. Strictly, [ISG and IIS] were contracted to two different parties, although one was a subsidiary of the other, and the contract terms were not identical." 22. It appeared to the Tribunal that if the scaffolding operation was an undertaking or part of an undertaking, then the asset, the scaffolding, was the main part of the undertaking or that element of the undertaking. The employees were necessary whilst [ISG], itself, was required to do anything with the scaffolding but [ISG] was able to and did receive income from the scaffolding without significant input from its own employees. It was also able to achieve hiring income from the scaffolding if any necessary work to the scaffolding was undertaken by someone else. By the nature of construction work, the need for scaffolding changes as a site develops. [ISG] was able to cater for this by moving scaffolding around its organisation as was necessary from time to time. Even if [ISG] had been awarded a new contract at the Drypac site after its actual contract was terminated, there would have been a gradual reduction in the need for scaffolding and the scaffolding would have been removed for use elsewhere by [ISG]. Whilst it would have occurred later, it appeared to the Tribunal that the pattern of [ISG's] scaffolding requirement was similar to what it would have been had [ISG] been awarded a further contract before moving from the Drypac site. The Tribunal was not satisfied that an undertaking could be sufficiently well defined within [ISG] for a possible transfer of that undertaking to be considered. The Tribunal was not satisfied that an undertaking could be identified which was smaller than the wider undertaking of [ISG] beyond the Drypac site. 23. The Tribunal is unanimous in finding that the scaffolding part of [ISG's] operation at the Drypac site was not an undertaking in its own right capable of being transferred for the purposes of the Regulations. Further, the undertaking of which it was a part was larger than [ISG's] operation at Sellafield. It also follows that the scaffolding combined with the cleaning did not form an undertaking for the purposes of the Regulations. In any event, if the scaffolding operation did form an undertaking then it was retained by [ISG] as it continued to receive income from the ownership of its asset, the scaffolding. 24. In relation to cleaning, the Tribunal unanimously finds that if there had been an undertaking capable of being transferred whilst [ISG] had the contract at the Drypac site, that entity could not be identified after the alleged transfer(s), either within [IIS] or its cleaning sub-contractor. The method of working was different and was split between two employers. "
The result of those conclusions was that the Tribunal found that there was no undertaking capable of being transferred by ISG to IIS and, necessarily, no transfer of any such undertaking or part of it, so it dismissed the applicants' complaints against IIS. The appeal[23]For ISG, Mr Brown criticises the Tribunal's reasons for failing overtly to adopt the approach it should have adopted as explained in Spijkers -v- Gebroeders Benedick and Others [1986] 3 ECR 1119, a decision of the European Court of Justice which was followed and applied in Cheesman -v- Brewer [2001] IRLR 144 and RCO -v- UNISON [2002] IRLR 401 and which stresses that all factors must be analysed in order to arrive at an informed decision as to whether there has been a relevant transfer of an undertaking.[24]The Spijkers decision was a decision on whether there had been a "transfer of an undertaking, business or part of a business to another employer" within the meaning of Article 1 of EEC Council Directive 77/187, commonly referred to as the "Acquired Rights Directive". The 1981 Regulations implemented that Directive. In the Spijkers decision, the ECJ said this:
"11……… the decisive criterion for establishing whether there is a transfer for the purposes of the directive is whether the business in question retains it identity. 12. Consequently, a transfer of an undertaking, business or part of a business does not occur merely because its assets are disposed of. Instead it is necessary to consider, in a case such as the present, whether the business was disposed of as a going concern, as would be indicated, inter alia , by the fact that its operation was actually continued or resumed by the new employer, with the same or similar activities. 13. In order to determine whether those conditions are met, it is necessary to consider all the facts characterising the transaction in question, including the type of undertaking or business, whether or not the business's tangible assets, such as buildings and moveable property are transferred, the value of its intangible assets at the time of the transfer, whether or not the majority of its employees are taken over by the new employer, whether or not its customers are transferred and the degree of similarity between the activities carried on before and after the transfer and the period, if any, for which those activities were suspended. It should be noted, however, that all those circumstances are merely single factors in the overall assessment which must be made and cannot therefore be considered in isolation."
[25]These principles were applied by the EAT in Cheesman -v- R Brewer Contracts Ltd [2001] IRLR 144 . Put simply, the case was one in which a local authority awarded a contract for the maintenance of its stock of let-out properties. A company called Onyx obtained the contract and also a renewal of it. The award of a further contract was put out to tender and Brewer obtained it. No assets, tangible or intangible, were passed by Onyx to Brewer, nor did Brewer take on any Onyx employees. The Employment Tribunal held that the only item that could be regarded as transferred from Onyx to Brewer was the contract itself and that there was no transfer of any undertaking for the purposes of the 1981 Regulations. The appeal to the EAT was as to whether the Employment Tribunal had directed itself to the right questions. In the early part of the judgment, delivered by Mr Justice Lindsay, the judge referred to the decision of the ECJ in Suzen -v- Zehnacker [1997] IRLR 255 , in the course of which judgment the Court said at paragraph 23:
"….. Article 1.1 of the Directive ….. is to be interpreted as meaning that the Directive does not apply to a situation in which a person who had entrusted the cleaning of his premises to a first undertaking terminates his contract with the latter and, for the performance of similar work, enters into a new contract with the second undertaking, if there is no concomitant transfer from one undertaking to the other of significant assets or taking over by the new employer of a major part of the workforce, in terms of their numbers and skills, assigned by his predecessor to the performance of the contract."
That passage might be said to provide solid support for the decision under appeal in the Cheesman case, and might also be said to support the weight of that Tribunal attached in present case to the minimal extent that there was any transfer of assets from ISG to IIS. But Mr Justice Lindsay, in his judgment, then referred, inter alia , to the decision of the Court of Appeal in ECM (Vehicle Delivery Service) Ltd -v- Cox and Others [1999] IRLR 559 , a case in which there was again no transfer of assets or employees, and observed that its outcome could not have been what it was if the passage cited from the Suzen case was to be regarded as the sole test in such circumstances. On the contrary, in the ECM case, the Court of Appeal made it clear that the Suzen case should be seen in its proper context, that the ECJ had not there overruled its early decisions such as that in Spijkers , and that it was still for the national court to make "the necessary factual appraisal" in order to decide whether there has been a transfer, an exercise requiring a consideration of "all the facts characterising the transaction in question".[26]Mr Justice Lindsay, in his judgment in Cheesman , then identified the principles to be applied in answering the questions such as were before the Employment Tribunal in the present case. The first question is as to whether there is an undertaking, and in paragraph 10 of the decision in Cheesman , Mr Justice Lindsay identified the criteria to be taken account of in ascertaining whether there had been such an undertaking. "10. From those four cases we distil the following. We shall attempt, although it is not always a clear distinction, to divide considerations between those going to whether there is an undertaking and those, if there is an undertaking, going to whether it has been transferred. The paragraph numbers we give are references to the numbering in the IRLR reports of the ECJ's judgments. Thus:(i) As to whether there is an undertaking, there needs to be found a stable economic entity whose activity is not limited to performing one specific works contract, an organised grouping of persons and of assets enabling (or facilitating) the exercise of an economic activity which pursues a specific objective - Sanchez Hidalgo paragraph 25; Allen paragraph 24 and Vidal para 6 (which, confusingly, places the reference to "an economic activity" a little differently). It has been held that the reference to "one specific works contract" is to be restricted to a contract for building works - see Argyll Training infra EAT at paras 14-19.(ii) In order to be such an undertaking it must be sufficiently structured and autonomous but will not necessarily have significant assets, tangible or intangible - Vidal paragraph 27; Sanchez Hidalgo paragraph 26.(iii) In certain sectors such as cleaning and surveillance the assets are often reduced to their most basic and the activity is essentially based on manpower - Sanchez Hidalgo paragraph 26.(iv) An organised grouping of wage-earners who are specifically and permanently assigned to a common task may in the absence of other factors of production, amount to an economic entity - Vidal paragraph 27; Sanchez Hidalgo paragraph 26.(v) An activity of itself is not an entity; the identity of an entity emerges from other factors such as its workforce, management staff, the way in which its work is organised, its operating methods and, where appropriate, the operational resources available to it - Vidal paragraph 30; Sanchez Hidalgo paragraph 30; Allen paragraph 27."[27]Mr Justice Lindsay then went on to set out the criteria which have to be taken into account in determining whether there has been a transfer of any undertaking so found He dealt with that in paragraphs 11 and 12. "11. As for whether there has been a transfer:-(i) As to whether there is any relevant sense a transfer, the decisive criterion for establishing the existence of a transfer is whether the entity in question retains its identity, as indicated, inter alia, by the fact that its operation is actually continued or resumed - Vidal paragraph 22 and the case there cited; Spijkers -v- Gebroeders Benedik Abattoir C.V. [1986] ECR 1119 ECJ; Schmidt -v- Spar-und Leihkasse [ 1994] IRLR 302 ECJ para 17; Sanchez Hidalgo paragraph 21; Allen paragraph 23.(ii) In a labour-intensive sector it is to be recognised that 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 predecessors to that task. That follows from the fact that in certain labour-intensive sectors a group of workers engaged in the joint activity on a permanent basis may constitute an economic entity - Sanchez Hidalgo paragraph 32.(iii) In considering whether the conditions for existence of a transfer are met it is necessary to consider all the factors characterising the transaction in question but each is a single factor and none is to be considered in isolation - Vidal paragraph 29; Sanchez Hidalgo paragraph 29; Allen paragraph 26. However, whilst no authority so holds, it may, presumably, not be an error of law to consider "the decisive criterion" in (i) above in isolation; that, surely, is an aspect of its being "decisive", although, as one sees from the "inter alia" in (i) above, "the decisive criterion" is not itself said to depend on a single factor.(iv) Amongst the matters thus falling for consideration are the type of undertaking, whether or not its tangible assets are transferred, the value of its intangible assets at the time of transfer, whether or not the majority of its employees are taken over by the new company, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer, and the period, if any, in which they are suspended - Sanchez Hidalgo paragraph 29; Allen paragraph 26.(v) In determining whether or not there has been a transfer, account has to be taken, inter alia, of the type of undertaking or business in issue, and the degree of importance to be attached to the several criteria will necessarily vary according to the activity carried on - Vidal paragraph 31; Sanchez Hidalgo paragraph 31; Allen paragraph 28.(vi) Where an economic entity is able to function without any significant tangible or intangible assets, the maintenance of its identity following the transaction being examined cannot logically depend on the transfer of such assets - Vidal paragraph 31; Sanchez Hidalgo paragraph 31; Allen paragraph 28.(vii) Even where assets are owned and are required to run the undertaking, the fact that they do not pass does not preclude a transfer - Allen paragraph 30.(viii) Where maintenance work is carried out by a cleaning firm and then next by the owner of the premises concerned, that mere fact does not justify the conclusion that there has been a transfer - Vidal paragraph 35.(ix) More broadly, the mere fact that the service provided by the old and new undertaking providing a contracted-out service or the old and new contract-holder are similar does not justify the conclusion that there has been a transfer of an economic entity between predecessor and successor - Sanchez Hidalgo paragraph 30.(x) The absence of any contractual link between transferor and transferee may be evidence that there has been no relevant transfer but it is certainly not conclusive as there is no need for any such direct contractual relationship Sanchez Hidalgo paragraphs 22 and 23.(xi) When no employees are transferred, the reasons why that is the case can be relevant as to whether or not there was a transfer - ECM page 1169.(xii) The fact that the work is performed continuously with no interruption or change in the manner or performance is a normal feature of transfers of undertakings but there is no particular importance to be attached to a gap between the end of the work by one sub-contractor and the start by the successor - Allen paragraphs 32-33. 12. More generally the cases also show:- (i) The necessary factual appraisal is to be made by the national court - ECM p.561,23; Allen paragraph 28. (ii) The Directive applies where, following the transfer, there is a change in the natural person responsible for the carrying on of the business who, by virtue of that fact, incurs the obligation of an employer vis-a-vis the employees of the undertaking, regardless of whether or not ownership of the undertaking is transferred - Allen paragraph 16. (iii) The aim of the Directive is to ensure continuity of employment relationships within the economic entity irrespective of any change of ownership - Allen paragraph 23 - and our domestic law illustrates how readily the courts will adopt a purposive construction to counter avoidance - see Lord Oliver's speech in Litster -v- Forth Dry Dock Co. Ltd [1989] IRLR 161 at 167."[28]In the light of the criteria to which Mr Justice Lindsay referred, Mr Brown submits that in the present case the Tribunal simply failed to take account of all the facts that they should have done in deciding, first, whether there was an undertaking capable of transfer, and, secondly, whether, if so, there was a transfer. He says that the Tribunal elevated the point about the non-transfer of tangible assets by ISG to IIS to a level which, in practice, appears to have made it almost dispositive of both elements of the preliminary issue, and that they lost sight of, and appear to have failed to have taken account of, all the other factors bearing on the matter.[29]As to whether there was an undertaking, he says that, on the agreed facts, the ISG scaffolding managers, scaffolders and labourers, comprised an organised group of persons and assets. The economic activity pursuing a specific objective was the scaffolding service which ISG separately tendered and contracted for. It was structured and autonomous from the other services performed by ISG, such as painting, plumbing and flooring. It was specifically assigned to the Drypac scaffolding project. Mr Brown submits that the criteria for the identification of an undertaking, referred to in paragraphs 10(i),(ii) and (iv) of the judgment in Cheesman ,were satisfied in the present case, but he says that the Tribunal paid no overt regard to them. He submits that the Tribunal were in error in their decision in concluding that the scaffolding was the main part of ISG's undertaking. The parties had agreed the minima required by ISG to perform its contract with BE (and we have earlier listed the eight items comprising those minima above) and this was more than just the provision of scaffolding.[30]Ms Brown's submissions on this aspect of the matter adopted Mr Brown's submissions, but were otherwise to the same effect. She emphasised that ISG separately tendered for the BE scaffolding and cleaning contract, one which was separately contracted out by BE. From the outset, the scaffolding and cleaning service provided by ISG had its own scaffolding tubes, boards, and related materials, cabins and toilet facilities for staff use, a forklift truck, minibuses to transport staff and vehicles to transport scaffolding. The service also had its own dedicated workforce, comprising managers, scaffolders and labourers. The cleaning service was initially contracted out, but later ISG employed its own body of workers. She says that the service was provided by ISG as a separate part of its overall business.[31]As to whether there was a transfer, both Mr Brown and Ms Brown drew attention to a number of factors which they say the Tribunal should have taken account of in deciding whether there had been a transfer. The decisive question for this purpose is whether the entity constituting ISG's undertaking had retained its identity, as indicated by the fact that its operation had actually continued or resumed (see paragraph 11(i) of the Cheesman judgment). The factors pointing to a positive answer to this question were that, in practice, IIS was simply carrying on and completing the scaffolding and cleaning services which ISG had been providing. To this end, IIS both purchased and hired scaffolding from ISG. It took over ISG's safety records, which it is said were critical to the provision by IIS of its scaffolding service. It also took over some 29 of the 57 ISG scaffolders who had been employed by ISG at the end of the mechanical construction phase of the project. Of the higher skilled grades of scaffolder, nine out of ten chargehands and both inspectors were taken over by IIS from ISG. Although it is correct that ISG's customer was BE and IIS's was BNFP, the latter customer was the parent of the former, and the economic reality is that the customer was substantially the same. The services which IIS provided were essentially the same as those ISG had provided - scaffolding and cleaning - the only real difference was in the scale of the operation, because the work changed from construction to commissioning, so that it followed that less scaffolding and men were required by IIS than had been required by ISG. There was no suspension of operations between the move of activity between ISG to IIS; there was simply a seamless change.[32]Overall, Mr Brown and Ms Brown submitted that, by failing to identify all these matters and weigh them up in arriving at their decision on the existence of an undertaking and whether it was transferred, the Tribunal failed to adopt the approach which the authorities show they should have adopted. This is what the Spijkers case required, and that is still good law. It requires what Lord Justice Mummery referred to in RCO Support Services & Another -v- UNISON & Others [2002] IRLR 401 at paragraph 26, as the "multifactorial approach".[33]For IIS, Mr Walker submits that these criticisms of the Employment Tribunal's decision are unfounded. He acknowledges that the Tribunal made no reference to any authorities in its reasons, and says that their failure to do so does not constitute any error of law. We entirely agree with that, and provided that a Tribunal's reasons reflect that they have applied the right principles, it matters not that they have not identified the authorities from which those principles are derived. The question on this appeal, however, is whether it can be seen from the reasons they did give that the Tribunal did in fact adopt the right approach.[34]As to their decision that there was no undertaking, Mr Walker says that in paragraph 10 of their decision, the Tribunal identified the potential undertakings as relating to the scaffolding and/or cleaning services by ISG for the Drypac project.. He says that the Tribunal made sufficient findings to justify their conclusion that there was no such undertaking, relying largely on the fact that ISG was involved in other unrelated projects on the Drypac site, so that it could not be said that the scaffolding work was exclusively undertaken for the Drypac project. They were not satisfied that an undertaking could be identified which was smaller than the overall undertaking of ISG beyond the Drypac project. They found, in paragraph 43 of their reasons, that Mr Butler, ISG's senior site supervisor and manager, had responsibility for all of ISG's activities at Sellafield, and not just for the Drypac project.[35]As to whether there is scope for criticism of the Tribunal's decision that, if there was an undertaking, there was no transfer, Mr Walker refers to the fact that the Tribunal found that there was a minimal transfer of tangible and intangible assets from ISG to IIS, and found that the scaffolding was the main part of ISG's undertaking. In effect, they had held that ISG's contract with BE was an asset reliant contract. Mr Walker says the Tribunal specifically considered ISG's employees in paragraph 22 of their decision, but we note that the mention there made of them did not include any reference to, or consideration of, the fact that a high proportion of them were taken on by IIS. Mr Walker refers to the fact that the Tribunal found that each construction contract in the three phases of the Drypac project related to different, albeit overlapping, activities; that ISG and IIS were contracted to different parties, albeit that BE was a subsidiary of BNFP; and that their respective contract terms were not identical. The finding was that IIS was awarded its own contract, it did not just take over ISG's.[36]The decision on this appeal is not an easy one. We remind ourselves, and having done so, we hope we do not forget, that it is no part of the function of this Appeal Tribunal to purport to make findings of fact on the issues which were before the Employment Tribunal, and then to substitute those findings for the findings made by the Employment Tribunal. The ultimate arbiter on questions of fact is the Employment Tribunal and this Tribunal can only interfere with their decision if it can detect an error of law in the way they have arrived at its decision. In this case, the error of law attributed to the Tribunal is that they did not take account of all the factors that they should have done in arriving at the twin questions of whether there was an undertaking, and if so, whether there was a transfer of it. If that contention is well founded, then we consider that an error of law would be established, and we would be entitled to review the Tribunal's decision.[37]We have to say that we do approach the reasoning of the Tribunal in this case with some degree of concern. Their reasoning includes no detailed accounts of the facts forming the background to their decision, or of the principles which the reported authorities required it to apply in arriving at its conclusion, and we have regard to the fact that the issues raised by the 1981 Regulations and the Directive are complicated issues which do require careful consideration by any decision-making body required to consider them. In effect, what the Tribunal did in this case was to take the agreed statement of facts and the relevant authorities as read, and merely provide a generalised account of the former, and a somewhat summary account of their conclusion. The danger inherent in both aspects of that manner of disposing of the preliminary issue is that the Tribunal have deprived themselves of the valuable discipline which a careful recitation of the facts found and of the applicable principles of law imposes on a decision-making body. There is in many cases no real substitute for spelling those matters out in the reasoning, however tedious that exercise may be, since the very exercise of doing so will enable the Tribunal to satisfy themselves that they are, in the course of arriving at their decision, taking all necessary matters into account and have positively addressed them, quite apart from the fact that it will also enable the parties to know how the Tribunal have arrived at their decision.[38]Having made those observations, we do, however, also bear in mind the observations in the Court of Appeal, to which Mr Walker referred us, in the decision of Martin -v- MBS Fastenings (Glynwed) Distribution Ltd [1983] IRLR 198 . In particular, at paragraph 19, Sir John Donaldson said:
"Finally it was submitted that the Industrial Tribunal was under a duty to state the law, its primary findings of fact, its secondary findings of fact and its conclusions. This is wholly misconceived. The duty of an Industrial Tribunal is to give reasons for its decision. This involves making findings of fact and answering a question or questions of law. So far as the findings of fact are concerned, it is helpful to the parties to give some explanation for them, but it is not obligatory. So far as the questions of law are concerned, the reasons should show expressly or by implication what were the questions to which the tribunal addressed its mind and why it reached the conclusions which it did, but the way in which it does so is entirely a matter for the Tribunal."
We do not, of course, question that, but the Court of Appeal has itself also emphasised, in the oft cited decision of Meek -v- City of Birmingham District Council [1987] IRLR 250 , that the Tribunal must at least provide sufficient findings to enable the parties to know why they have won or lost. The criticism levelled at the decision of this Tribunal is that the economy of its reasoning is insufficient for the losing parties to know that. In particular, in performing as they had to an exercise which requires the adoption of what Lord Justice Mummery has described as the "multifactorial" approach, there is, in our view, a serious concern that the Tribunal have not, or may not have, paid either any, or any sufficient, regard to matters to which they should have had regard in arriving at their decision on the two questions. However, we consider that we ought not to move on to the further position of concluding that the Tribunal have in fact overlooked material considerations unless we can identify them, or at least some of them, with at least some conviction of certainty.[39]We have ultimately come to the conclusion that the Tribunal's decision in this matter is unsatisfactory for one relatively short reason. We regard the points made by Mr Brown and Ms Brown in relation to the factors pointing towards there having been a transfer of an undertaking to IIS as compelling ones, being factors to which the Tribunal do not show they had regard as being significant ones; in particular, they pay no regard at all to the very important factor that a high number of ISG's employees were taken over by IIS. But of course none of those aspects of the Tribunal's decision matter unless they were wrong in their conclusion that there was no undertaking capable of transfer in the first place.[40]As to that aspect of the matter, the judgment of the EAT in paragraph 10 in the Cheesman decision identifies the criteria to which the Employment Tribunal should have had regard. The Tribunal, of course, made no reference to either Cheesman or to the criteria which that case identified. We are concerned that their decision that there was no undertaking was one which, on its face, appears to reflect that no adequate consideration was given to the various factors to which consideration ought to have been given in arriving at that conclusion. In particular, we have listed the agreed facts as to what ISG required in order to perform its contract, and those requirements went considerably beyond the availability to ISG of a supply of scaffolding. They also required a team of workers, as well as other ancillary equipment, and there is no dispute that those workers included some nine chargehands, who were of higher skilled grades than the others in the team, being workers who were taken over by IIS at the earliest possible stage in the assumption by IIS of its own contract. The ISG Drypac operation was not, therefore, an operation whose only element was the provision of scaffolding. It was an operation consisting of the provision by ISG of men, including skilled men, and equipment of various kinds necessary to provide the services required by the ISG contract, a key part of those services including the provision of scaffolding.[41]There was, it seems, no dispute about that before the Tribunal. Yet, in paragraph 22 of their decision, the Tribunal said this:
"22. It appeared to the Tribunal that if the scaffolding operation was an undertaking or part of an undertaking, then the asset, the scaffolding, was the main part of the undertaking or that element of the undertaking. The employees were necessary whilst [ISG], itself, was required to do anything with the scaffolding but [ISG] was able to and did receive income from the scaffolding without significant input from its own employees"
Those sentences therefore identify the scaffolding as the "main" part of the undertaking, recognising that there were other elements as, of course, the agreed facts show there were. Yet, in paragraph 23, the Tribunal then found this:
"23. The Tribunal is unanimous in finding that the scaffolding part of [ISG's]operation at the Drypac site was not an undertaking in its own right capable of being transferred for the purposes of the Regulations."
And then in the last sentence of that paragraph they said:
"In any event, if the scaffolding operation did form an undertaking then it was retained by [ISG] as it continued to receive income from the ownership of its asset, the scaffolding."
[42]We do not understand the logic underlying that conclusion. Having found in paragraph 22 that the scaffolding was only part of the undertaking, albeit the main part, we have difficulty in understanding the point being made in paragraph 23 that the scaffolding part of the operation was not an undertaking in its own right. Whilst the language of this part of the decision is not easy to understand, we are disposed to infer that the Tribunal are there simply referring to the scaffolding itself, not the overall operation involving the workers and the ancillary equipment which enabled the scaffolding services to be provided. Given that the agreed facts showed that there were other key elements, and given that the Tribunal themselves appear to have recognised that in the early part of paragraph 22, we consider that the Tribunal ought to have considered, but did not, whether, having regard to all of the facts relating to the services provided by ISG, its activities - which comprised not just the provision of scaffolding, but also the provision of a dedicated team of workers and ancillary equipment - amounted to an undertaking for the purposes of the 1981 Regulations. The Tribunal did not do this. It appears to us that they did not, when they came to their conclusion in paragraph 23, take account of matters they should have done in arriving at their conclusion that there was no undertaking. In that respect, it appears to us that their conclusion on that point erred in law and that their decision in that respect cannot stand. That being so, we are also satisfied, for reasons we have briefly given, that if there is a serious risk that their conclusion on the first point was wrong, then there is plenty of material, on the basis of which, as Mr Brown and Ms Brown were able to submit, there is a good arguable case for saying that there were sufficient facts justifying a conclusion that if, contrary to the Tribunal's finding that there was an undertaking, that undertaking was the subject of a transfer. In those circumstances, we consider that this decision is one which cannot stand.[43]We should record that Mr Walker sought to defend the decision by submitting that the decision of the European Court of Justice in Ledernes Hovedorganisation, acting for Rygaard-v- Dansk [1996] IRLR 51 inevitably points away from success by ISG, and by the applicants who support it, in their contention that there was here an undertaking and a transfer of it. We do not propose to discuss this decision in detail. It was, in fact, discussed in considerable detail, in perhaps slightly critical although in properly respectful terms, by Mr Justice Lindsay in Argyll Training Ltd -v- Sinclair and Others [2000] IRLR 630 , and he appears to have summarised his own views as to the weight to be attached to the Rygaard decision in the first sentence of paragraph 12 of that judgment, where he said: …. " Rygaard (which does not seem to have been cited to the tribunal below) is not an authority which readily yields up its principles if , indeed, there are any there to be found" And he then went on to discuss Rygaard , concluding in paragraph 18 that:
"Both Spijkers and Schmidt , together with the doubts as to the dictum's meaning, which we have already raised …. "
And we interpose to say that that is a reference to a dictum in paragraph 20 of Rygaard , which we quote below: ….. "thus suggest, at lowest, that there is no good reason to give an extended meaning to the proposition in Rygaard which we are examining. It is not open to us to say that Rygaard is wrong, but we can and do say that there is no good reason to extend it beyond whatever a literal, even pedantic, reading of it requires."[44]Mr Walker relies on paragraphs 20 to 23 of the decision in Rygaard , which read as follows:
"20 The authorities cited above presuppose that the transfer relates to a stable economic entity whose activity is not limited to performing one specific works contract. 21 That is not the case of an undertaking which transfers to another undertaking one of its building works with a view to the completion of that work. Such a transfer could come within the terms of the Directive only if it included the transfer of a body of assets enabling the activities or certain activities of the transferor undertaking to be carried on in a stable way. 22 That is not so where, as in the case now referred, the transferor undertaking merely makes available to the new contractor certain workers and material for carrying out the works in question. 23 The reply to the question submitted must therefore be that the taking over - with a view to completing, with the consent of the awarder of the main building contract, works started by another undertaking - of two apprentices and an employee, together with the materials assigned to those works, does not constitute a transfer of an undertaking, business or part of a business, within the meaning of Article 1(1) of the Directive."
Mr Walker relies on those paragraphs in support of the argument that this is a case where, putting it at its highest, ISG was performing a specific works contract and that the transfer of such a contract to another party is not capable of being a transfer within the meaning of the Directive.[45]We have difficulty in identifying the true principle to be divined from the decision in Rygaard . Mr Brown submits that, whatever that principle may be, this is not a case of IIS having taken over ISG's contract: it is a case where there were two contracts, the ISG contract and the quite separate IIS contract. But even if the substance of the matter is to be regarded as a takeover by IIS of the ISG contract, it is a case which included a transfer to IIS of a body of assets enabling the activities of the transferor to be carried on in a stable way within paragraph 21 of the decision.[46]We would find it difficult on this appeal to identify sufficient facts to be able to come to a conclusion as to whether or not the principle of Rygaard , whatever its precise limitations may be, is one which impacts upon this case. It is to be noted that although Mr Walker advanced the same argument to the Employment Tribunal, they did not refer to it or feel able to dispose of the case summarily on the basis that the case of ISG and of the applicants was out of court because of the principles in Rygaard . As it seems to us, before this Tribunal could focus on whether the principle in Rygaard impacts fatally on the contention that there was a relevant undertaking and a relevant transfer of it, there need to specific findings of fact which enable the Tribunal to consider whether or not the Rygaard principles impact upon them.[47]We propose, therefore, to say no more about the difficult decision in Rygaard . We will simply say that, for the reasons that we have given, at perhaps excessive length, we propose to allow the appeal and remit to a Tribunal, and we presume it should be a differently constituted Tribunal, the question of whether there was an undertaking, and if so, whether there was a relevant transfer of it.[48]Mr Walker, we propose to refuse permission to appeal because we do not consider that this case gives rise to a question of principle. It gives rise to an interpretation of a rather difficult decision by the Employment Tribunal.