(1) MS L S DAVIES (2) MRS G BAIG v ETON AIR LTD [2004] UKEAT 0016_04_2207

EMPLOYMENT APPEAL TRIBUNAL

BAILII case number: [2004] UKEAT 0016_04_2207

Case No Appeal No. UKEAT/0016/04

Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

Between

(1) MS L S DAVIES (2) MRS G BAIGAPPELLANT

ETON AIR LTDRESPONDENT

Before

Mr Justice Mitting Mrs C Baelz Mr D J Jenkins

Date 22 July 2004

[1]APPEARANCES For the Appellant MRS R O'CONNELL (Solicitor) Messrs Lawrence Graham Solicitors 190 Strand London WC2R 1JN For the Respondent MISS K NEWTON (of Counsel) Instructed by: Messrs Meade King Solicitors 11-12 Queen's Square Bristol BS1 4NT SUMMARY Transfer of Undertakings ET held, correctly, that where travel services were in part provided by Applicants and in part by other employees, there was no undertaking or part of an undertaking (comprising the activity carried on by the Applicants) to transfer. THE HONOURABLE MR JUSTICE MITTING This is an appeal against the decision of the Employment Tribunal sitting at Reading in a decision entered on the Register and sent to the parties on 20 October 2003, that Ms Davies and Mrs Baig did not have their contracts of employment transferred to Eton Air Ltd, the Respondent, by virtue of the Transfer of Undertaking (Protection of Employment) Regulations 1981 .

[2]The facts were straight forward and were clearly found by the Tribunal in paragraphs 8 to 13 of its Decision and were as follows:

"8. From 23 October 2000 both of the applicants were employed by the Travel Company dealing with the travel arrangements for Equant [a customer of the Travel Company]. 9. The work involved flight bookings, car and hotel bookings, passport and VISA services. In addition they dealt with the Travel Company to arrange special fare deals. A 24 hour emergency service was provided for Equant by the Travel Company in which the two applicants did not participate. 10. They used equipment belonging to the Travel Company such as their computer workstations, printers, invoice printers and a safe. Those items were returned to the Travel Company at the conclusion of the contract between Equant and the Travel Company. The services were provided by the applicants in an office provided by Equant. 11. In October 2002 Eton Air Ltd had discussions with Equant about the possibility of their supplying Equant with their travel needs. At the beginning of 2003 Eton Air Ltd was awarded the contract to commence on 1 March 2003. The service to be provided by Eton Air Ltd was somewhat different in that in addition to dealing with their travel arrangements and the 24 hour emergency service, they also provided a' meet and greet' service. 12. On 15 January 2003 Mr Fisher of Eton Air Ltd attended Equant's premises for a meeting and whilst there had a discussion with the applicants to ascertain whether or not Eton Air Ltd could utilise their services. It is not in dispute between the parties that the meeting was hostile and that Mr Fisher decided he did not wish to employ either applicant 13. On 1 March Eton Air Ltd took over the contract with Equant from the Travel Company. They did not employ anybody specifically to undertake the Equant work and whilst two employees now undertake the Equant work in addition to other work there are no Eton Air Ltd employees dedicated solely to Equant."

[3]The Appellants' case before the Tribunal was that the work of providing travel services to Equant at Equant's offices was a distinct economic activity and amounted to part of the undertaking of the Travel Company, so that when the Travel Company ceased to perform that work and it came to be performed by the Respondents, notwithstanding that there was no agreement between the Travel Company and the Respondents to take over that activity, there was nonetheless a transfer of that part of the Travel Company's undertaking.

[4]Regulation 3 of the Regulations provides "(1) Subject to the provisions of these Regulations, these Regulations apply to a transfer from one person to another of an undertaking situated immediately before the transfer in the United Kingdom or a part of one which is so situated." The Employment Tribunal reminded itself in terms of the wording of that Regulation. Those deceptively simple words have, as is notorious, given rise to much litigation and much learning both in this country and in the European Court of Justice.

[5]The Tribunal concluded that it was sufficient to direct itself in accordance with the summary of the principles to be applied made by this Tribunal in Cheesman v R Brewer Contracts Ltd

[2001] IRLR 144

. It set out this Tribunal's summary of the tests to be applied, taken from the headnote of that decision. It set out, as Cheesman requires, the elements that relate to each of the two basic questions that have to be answered. First, whether or not there was an undertaking or part of an undertaking. Secondly, whether or not, if there was, it was transferred.

[6]The Tribunal reminded itself of the observations of the European Court of Justice in Suzen v Zehnacker Gebaudereinigung GMB Krankenhausservice

[1997] IRLR 255

and in particular the helpful, although subsequently commented upon, observation that "Consequently, the mere loss of a service contract to a competitor cannot be itself indicative of the existence of a transfer within the meaning of the Directive."

[7]The Tribunal in paragraph 23 posed the two relevant questions: whether there was a separate entity and whether there was a transfer. Its conclusions were set out in paragraphs 30 to 39 of its decision. In summary, it appears to have decided to ask itself and answer the first of the two Cheesman questions, namely whether or not there was a part of an undertaking capable of being transferred before the alleged transfer. Its conclusions were as follows:

"31. It seemed to us from the evidence that the applicants were engaged to perform a part of one specific works contract. They were allocated to Equant solely to perform a part of the service to Equant, that of making travel arrangements during the normal working day. 32. In considering whether their work for Equant amounted to an economic activity we then looked at various factors as detailed in Cheesman . 33. We asked ourselves whether the contract retained its identity. The contract provided by the applicants was somewhat different from the contract performed by Eton. The work carried out by the applicants was solely concerned with making travel arrangements during working hours and obtaining special deals from their head office. The contract performed by Eton involved a meet and greet service. 34. We asked ourselves whether the service provided by the Applicants was autonomous. Other services were provided by the Travel Company that were not provided by the two applicants. For example 24 hour emergency service and the special deals service were both provided by other employees of the Travel Company to Equant. It would seem therefore that the applicants were not an autonomous unit operating on their own to provide the service to Equant. 35. There was no transfer of assets. All of the equipment used by the applicants was returned to the Travel Company after Eton Air Ltd took over the work. 36. There was a complete absence of any contractual link between the transferor and the transferee in this case. 37. As a consequence of the above we have some difficulty in finding that the exercise carried on by the two applicants was an economic entity in its own right. The applicants were not required to carry out the whole contract provided to Equant by the Travel Company but only part of it. We also had regards to the fact that an activity itself is not necessarily an entity. We considered the workforce, the way in which its work was organised and the operational resources available to it. 38. Per Suzen , the mere loss of a service contract to a competitor cannot, of itself, amount to a TUPE transfer under the Directive. 39. It seems to us, taking everything into account, that the applicants fall at the first hurdle and that there was not an economic entity capable of amounting to a transfer entitled to protection under the TUPE Regulations."

[8]Mrs O'Connell makes three essential criticisms of that reasoning. First, she submits that the reference in paragraph 31 to "specific works contract" suggests that the Tribunal misunderstood and so misapplied the Cheesman test. As was explained in Cheesman , the reference to specific works contract is to be taken as a reference to contracts in the field of building works and not a reference to contracts in any other economic activity. To the extent that the Tribunal would have been better advised not to use the word 'works' in that phrase, we agree with Mrs O'Connell's submission. If the sentence had read "It seemed to us from the evidence that the applicants were engaged to perform a part of one specific contract", it would have been unimpeachable.

[9]However, we are quite unable to accept that by referring to 'works' in that phrase the Tribunal had in mind anything other than the contract with which they were concerned. This is about as far as possible as it is to be removed from a building works contract, and it cannot conceivably be thought that the Tribunal had any such contract in mind. In our view all that the Tribunal were doing was drawing attention to a basic question which they asked properly, namely whether or not the Applicants were engaged to perform a part of a specific contract.

[10]Mrs O'Connell's next criticism is that the Tribunal erred not as we understand it in law, but in the emphasis that they gave to it, in drawing attention to the fact that part of the service provided by the Respondents to Equant, the 24 hour emergency service and the special deals service, were provided by other employees at premises other than those of Equant.

[11]In our view this is simply a matter of judgment for the Tribunal. The Tribunal, as we think in the end Mrs O'Connell conceded, was entitled to conclude that it was a relevant factor and was entitled to conclude that it was a significant relevant factor in the determination of the question which they had to answer.

[12]That it was relevant, is, in our view, self-evident. What was being provided by the Travel Company to Equant was a package of travel services. Part, perhaps the major part, was provided by the Appellants at Equant's offices, but significant parts were provided elsewhere. That, the Tribunal were entitled to conclude, and in our view rightly concluded, meant that the economic activity carried on by the Travel Company in relation to the supply of services to Equant was not exclusively carried on at Equant's offices by the Appellants but was spread within their business.

[13]Mrs O'Connell's next criticism is that the Tribunal laid emphasis upon the fact that the service provided by the Respondent included service activities not provided by the Travel Company, in particular the meet and greet service. We see the force of this criticism. If what is otherwise a part of an undertaking is transferred, it cannot be decisive, perhaps not even relevant, that the transferee adds to it another activity. If that had been the only reason why the Tribunal concluded that there had been a transfer of a relevant undertaking then the Tribunal's decision would be open to criticism, but it clearly was not. The Tribunal's decision was founded, and founded squarely, upon the valid proposition that the activity carried on by the Appellants at Equant's offices was not a part of an undertaking but capable of being transferred, but something not so capable.

[14]Mrs O'Connell goes on to criticise the Tribunal for introducing into its reasoning findings relevant only to the second of the Cheesman tests, namely whether or not there had been a transfer. It seems to us that that criticism is well-founded. Paragraphs 35 and 36 are clearly directed only to the question of whether or not there was a transfer. Likewise paragraph 38 was mainly so directed. But for the Tribunal's clear findings, as already indicated, it might be arguable that the reference to those matters was a relevant error of law, but given its clear findings then those references are, in our view, simply superfluous.

[15]We would add this, that if the Employment Tribunal had gone on to consider the question of whether or not there had been a transfer here, we can see no answer but that there was no transfer. This was simply the loss of a contract for services, including those provided by the Appellants, to a competitor. The activity consisted, in part, of the services provided by the Appellants. In such circumstances the loss of the contract to provide those services, as Suzen indicates, is most unlikely to give rise to a relevant transfer. In our view, had the Tribunal gone on to ask itself the second of the two Cheesman questions, it would have been driven to that answer.

[16]For those reasons this appeal is dismissed.