GEFCO UK LTD v MR J S OATES CAR & DELIVERY CO LTD [2005] UKEAT 0014_05_1706

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2005] UKEAT 0014_05_1706Case No Appeal No. UKEAT/0014/05Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
GEFCO UK LTDAPPELLANTMR J S OATES CAR & DELIVERY CO LTDRESPONDENT
Before
His Honour Judge McMullenDate 17 June 2005
[1]APPEARANCES For the Appellant MS M MACRO (of Counsel) Instructed by: PSA Peugeot Citroen Automobiles UK Ltd Aldermoor House P O Box 227 Aldermoor Lane Coventry CV3 1LT For the First Respondent For the Second Respondent MR D HUGHES (of Counsel) Instructed by: Messrs Frank Allen Pennington Solicitors 5-7 Regents Terrace South Parade Doncaster DN1 2EE MR C HARRIES (of Counsel) Instructed by: EEF Western Engineer's House The Promenade Clifton Down Bristol BS8 3NB SUMMARY TUPE Employment Tribunal correctly applied relevant European Court of Justice authorities in assessing the Spijkers factors and holding there was a relevant transfer of part of an undertaking. HIS HONOUR JUDGE McMULLEN QC This case is about breach of the TUPE Regulations. The Judgment represents the views of all three members. We will refer to the parties as GEFCO (the Appellant), the Second Respondent as CCD and the First Respondent, Mr Oates, as the Claimant. Introduction[2]It is an appeal by GEFCO the Second Respondent in those proceedings against a Reserved Judgment of an Employment Tribunal sitting at Sheffield over one day and a day in Chambers registered with reasons on 24 October 2004. The Chairman was Mr G R Little. The Claimant represented himself and here is represented by Mr Dermot Hughes of Counsel. GEFCO was represented there and here by Ms CHK Macro of Counsel and the Second Respondent, CCD, was represented there and here by Mr Chris Harries, an officer of the EEF Western. All three advocates have presented Skeleton Arguments and, in Mr Harries's case, an additional written submission and we are grateful to all of them for the careful way in which the case has been presented and for its expeditious dispatch.[3]The Claimant claimed against CCD unfair dismissal in breach of the TUPE Regulations because of the refusal of GEFCO to accept that TUPE applied in the circumstances. CCD did not admit that TUPE applied but it did contend that GEFCO was responsible as a transferee and applied for joinder of GEFCO. GEFCO denied TUPE applied. Its response is important for it said as follows: "It is admitted that work carried out by the first respondent for GEFCO UK ceased on 2 April 2004. The work was then carried out by GEFCO UK itself. There was no transfer of the critical tangible assets (or any other assets), including the transporters used to move cars. In all the circumstances, the TUPE regulations did not apply and liability rests with STVA UK".[4]A preliminary hearing was set up to decide this matter. The Tribunal held that there was a relevant transfer of part of CCD's undertaking to GEFCO. GEFCO appealed. Directions sending this appeal, now in shorter amended form, to a full hearing were given at a preliminary hearing by His Honour Judge Prophet and members. The legislation and applicable law.[5]The relevant provisions of the legislation and the authorities affecting the interpretation of them were summarised by the Employment Tribunal and are not in dispute and we gratefully adopt them."17. The Applicable Law The Transfer of Undertakings (Protection of Employment) Regulations 1981 provide in Regulation 3 that a relevant transfer is 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 so situated'. Such a transfer can either be by sale or some other disposition or by operation of law (Regulation 3(2)). It may also take place 'whether or not any property is transferred to the transferee by the transferor' (see Regulation 3(4)(b)).18. Those regulations implement the Business Transfers Directive. The Directive and the domestic provisions have been the subject of many appellate decisions. The principles to be deduced from those decisions were helpfully distilled (as the law stood at that time) by the decision of the Employment Appeal Tribunal in the Cheesman case. We note therefore that the question is in two parts. First, it is necessary for the tribunal to establish whether or not there is an undertaking or part of one in the hands of the putative transferor. That means identifying 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. An activity of its self 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.19. If an undertaking is thereby identified the tribunal must then go on to consider whether there has been a transfer. The decisive criteria for establishing that is whether the entity so identified retains its identity in the hands of the putative transferee. It is necessary for the tribunal to consider all the factors characterising the transaction in question bearing in mind that each is a single factor and none is to be considered in isolation. Amongst the matters to be taken into account 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 on after the transfer, and the period, if any, in which they are suspended.20. The case of Oy Liikenne , a decision by the European Court of Justice, is reported in the same volume of the Industrial Relations Law Reports as Cheesman and so obviously could not be considered by the EAT in Cheesman itself. In Cheesman it is said where assets are owned and are required to run the undertaking the fact that they do not pass does not preclude a transfer. In contrast, the European Court in Liikenne say that a sector such as scheduled public transport by bus where the tangible assets contribute a significantly to the performance of the activity, the absence of a transfer to a significant extent from the old to the new contractor of such assets which are necessary for the proper functioning of the entity must lead to the conclusion that the entity does not retain its identity". To this can be added paragraph 8 of the TUPE Regulations. "8. Dismissal of employee because of relevant transfer (1) Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee shall be treated for the purposes of Part V of … (unfair dismissal) as unfairly dismissed if the transfer or a reason connected with it is the reason or principal reason for his dismissal. The facts[6]The Tribunal found that the parties could be described as follows:
"3. Tribunal's findings of primary fact The first respondent is a company whose business is transportation of motorcars (usually new) either from port of entry to distribution site or from dealer to dealer. The second respondent is part of the Peugeot Citroen group but its particular business is again transportation of motorcars, primarily those manufactured by its parent company. It carries out this function by means of car transporters which it owns and operates and it also subcontracts with other companies such as the first respondent. 4. In 2001, an agreement was reached between the respondents which can be best described as 'the managed trucks business'. …It states that the first respondent will provide two 9+ (a reference to capacity) transporter engineering trailers with DAF units and 4 drivers. The second respondent would manage those transporters from their base at Sandtoft. The first respondent would then invoice the second respondent on a monthly basis. Immingham was at that time a substantial port of entry for Peugeot motorcars which the second respondent needed to have transported to its depot at Sandtoft which was a distribution centre for its dealership in the North of England. 5. The first respondent utilised 2 transporters it already possessed but needed to recruit 4 drivers specifically for this work. The ratio of 4 drivers to 2 transporters was to permit those vehicles to be used day and night. The claimant was one of the drivers recruited. His letter of appointment appears at page 25 in the bundle, it is a letter dated 14 August 2001. The letter states 'You will be based at Sandtoft supporting the GEFCO Regional Distribution Centre on a two shift system commencing on 28 August 2001.'… 6. The second respondent managed the transporters and drivers by way of allocating work and controlling how that work was done. They would therefore have requirements for what vehicles they needed transporting at any particular time. The core work was what has been described as the Immigration/Sandtoft Shuttle, but in addition the drivers were from time to time required to move cars between dealers if there was no shuttle work to be done"
. As is clear, there was a dispute as to the applicability of TUPE but it was made clear by CCD that the ball should start rolling in respect of the four drivers as they would have TUPE applied to them. Correspondence ensued when the stance of GEFCO became clear, which is that it did not acknowledge that TUPE applied.[7]The rates of pay of drivers in both organisations did not differ substantially. On 10 March 2004, a number of events began to happen including dismissals. The Tribunal found as follows: "11. On 10 March 2004, Mr Kergoat of the first respondent wrote to the claimant informing him that the first respondent had been advised by GEFCO that the managed trucks contract would terminate on 2 April 2004. The letter goes on to say 'I regret therefore that today I have to give you notice that 2 April will be your last working day with Car and Commercial' (see page 91 of the bundle). The other three drivers received letters in identical terms. Shortly thereafter Mr Stewart and Mr Cunningham resigned and for a brief period worked for an Agency, Task Master. However, responding to an advertisement in the JobCentre placed by the second respondent, Mr Stewart applied for a job with the second respondent by his letter of 25 March 2004 (pages 114 to 115) and Mr Cunningham applied for a job by his letter of 23 March 2004 (pages 116 to 117). Both were successful and started work with the second respondent on 31 March 2004 (see pages 118 to 119)".[8]On 19 March 2004, Mr Cunningham worked his last day for CCD and on 25 March, Mr Stewart worked his. After a short period with an agency both started work on 31 March for GEFCO. Thus all four were dismissed but the latter two subsequently resigned during the course of their notice.[9]The Employment Tribunal considered the factors which it was bound by its self-direction to consider. It did so one by one. The fact that there was part of an undertaking does not seem to be in dispute in these proceedings for there is a clear finding at paragraph 21(a) that there was an undertaking and from its description by the Tribunal, we hold that this was a finding that there was a stable undertaking in the hands of CCD relating to the transporters and the operation conducted between it and GEFCO.[10]The Tribunal then considered whether that undertaking transferred and again, addressed a number of heads. There were four. There is no dispute as to the correctness of its finding that tangible and intangible assets did not transfer or that the customer was the same. There is a dispute over its finding that the activities were similar and that the employees as the Tribunal found de facto transferred:
"22. Accordingly, taking into account the de facto transfer of 2 employees and the similarity of the work post 2 April 2004, the tribunal conclude that the part undertaking we have identified did transfer to the second respondent and accordingly there was a relevant transfer for the purposes of TUPE"
. GEFCO's case 11. CHK PARA FORMAT Accepting on behalf of GEFCO that the direction given by the Tribunal on the law was correct and that a de facto transfer is a good description of what happened, Ms Macro contends that it was wrong to say there was a transfer from CCD to GEFCO of the employment of the two employees because there was a break which was interspersed with a period of temporary working for an agency. She contends on authority: see Brook Lane Finance Co Ltd v Bradley [1988] IRLR 283 (EAT) that the two employees were already in the service of the transferee on this supposition before the transfer and therefore could not be protected by TUPE. The Tribunal failed to say whether this was an asset or a labour intensive operation, but she accepted in debate, that it is always a matter of degree as to where the line is drawn between those two extremes. She contended that where there is a transport undertaking, it is always asset reliant and it is an error of law for a Tribunal not to decide which it is and in this case, not to have decided it was an asset reliant business. It was contended that since Messrs Stewart and Cunningham could not rely on TUPE, nor could the Claimant. The Tribunal had also made errors in its approach to the comparison of the activities pre and post the transfer. There never was a transfer of assets, although she accepts that GEFCO did purchase two new trucks to fill the gap left by CCD and did take on employees after the operation changed hands.[12]It was contended hat the consideration of one factor, namely similarity, would not swing what would otherwise not be a transfer into the scope of the Regulations: see Computacenter (UK) Ltd v Swanton & Ors (Unrep) EAT, HHJ Ansell and members 12 November 2004. The Tribunal failed to apply and be directed by the Judgment of the European Court of Justice in Oy Liikenne v Liskojärvi and Juntunen [2001] IRLR 171 and erred in failing to follow a literal instruction of it. CCD's case[13]On behalf of CCD and in submissions adopted by the Claimant, it is contended that none of the four grounds advanced by GEFCO betrays an approach which discloses an error of law. It is contended that the first ground relating to Oy Liikenne is misconceived. The Tribunal was required to take a broad approach to the question of transfer and to look at all of the relevant factors. The circumstances in Oy Liikenne were, in fact, different and it is not an error of law to hold where a transport undertaking is the subject of a claim, that the regulations apply: see P&O Trans European Ltd –v- Initial Transport Services Ltd [2003] IRLR 128 . As a matter of fact, the distinction between the instant case and Oy Liikenne was clear. In the latter case, there was a bus transport operation in the public sector following public advertising required by European Directive.[14]It is further contended that the resignation of the two drivers was caused by their dismissal by CCD which was, itself, caused by and connected with the loss of the contract which, if it is a relevant transfer, would be unlawful, contrary to Regulation 8(1). The Tribunal considered a more multi-factorial approach, as it was required to do. The activities were indeed similar. Not only is that put beyond doubt by the Notice of Appearance of GEFCO, but an examination of the oral evidence given on behalf of GEFCO indicates as much.[15]It is further contended that the judgment of the House of Lords in Litster and Ors v Forth Dry Dock & Engineering Co [1989] IRLR 161 applies. The legal principles[16]The legal principles to be applied in this case are those cited by the Employment Tribunal itself and acceptd to be a correct direction. A multi-factorial approach is required and no single factor is, of itself, conclusive. Reliance on the similarity of activities is not enough but it follows that a finding on more than one of the Spijkers factors avoids that criticism. The placement of a case at one end or the other of a spectrum running from labour intensive to asset reliant is a matter of fact and appreciation for the Employment Tribunal. Conclusions[17]Applying those principles to this case, we reject the arguments of GEFCO and have decided that the appeal should be dismissed. We uphold the submissions of CCD and of the Claimant.[18]It is not arguable that the finding as to the similarity of activities is in error. The response to which we have referred prepared by GEFCO's company solicitor put this beyond doubt. We have looked at the evidence produced for us by Mr Harries and it is clear that it was the thinking of GEFCO that the work undertaken by CCD for it was to be undertaken by it directly. The adoption by the Employment Tribunal of the language of GEFCO's witness, Ms Wootton, that it was the taking back of the work in-house is, in our judgement, conclusive. This was a part of CCD's overall undertaking, it was a stable entity, and the finding of fact by the Tribunal as to that cannot be impugned. The question is: did it transfer?[19]Looking at the factors which it considered pointing against there being a transfer are, of course, the non-transfer of tangible and intangible assets. As to the similarity of activities, the findings of fact indicate that there was continuity. That is not enough. There must be at least one other factor. Under the heading of "Similarity of Activities", it is clear that the Tribunal was addressing one of the other factors, namely whether or not there was continuity of customer base, for it has found that there was. There was also continuity of management. That therefore indicates that a number of the factors in the multi-factorial approach were answered in favour of there being a transfer, before it got to the issue of employees. The Tribunal was not obliged to categorise as asset reliant or follow literally Oy Liikenne as giving a solution in this case: see P&O Transport above and Abler v Sodexho MM Catering [2004] IRLR 168 ECJ. In any event, the facts in Oy Liikenne were, for the reasons advanced by Mr Harries different from those in the instant case.[20]We then turn to the question of employees. The circumstances here are both easy and difficult to analyse. Employees are clearly relevant. These Regulations are in terms about the protection of employment. There were four employees. They were all dismissed because CCD lost the business and GEFCO was bringing it back in-house. GEFCO, at the same time, would not recognise that TUPE applied and therefore would not be taking on the employees as a matter of fact, leaving aside for a moment whether they were obliged to as a matter of law. As a matter of fact, two of the four employees were employed up to the moment of the loss of the contract, in other words, until the time of the putative transfer. These contracts were not transferred to GEFCO because of GEFCO's stance. They are a significant part of the work-force: half. Had they been taken on, that fact would have been important in deciding whether a majority or a significant part of the work-force transferred. That adds a third positive factor within the six set out in Spijkers .[21]Concentration on Messrs Stewart and Cunningham rather overlooks this point. As is clear from Litster , they left CCD a few days before the transfer, took work at an agency and on 31 March worked in the same capacity at similar wages for GEFCO. Again, two is a significant proportion: half. They became employees. The Employment Tribunal was rightly circumspect about how to describe them and it did so fairly in describing them as de facto transferred. Actually, they could only transfer if agreement were reached by offer and acceptance between them and GEFCO (with or without involvement of CCD) on the one hand, or by operation of law. Whichever way it is put, it was not irrelevant for the Employment Tribunal to take account of them and to treat their appearance at GEFCO after a gap of only 10 or four days after leaving CCD as significant. The attribution of significance or importance – both words are interchangeable – was accepted by Ms Macro as one of appreciation for the Employment Tribunal. It must be acquitted of the criticism of failing to make a decision as to importance because it has graded matters of importance so that we can see the significance placed upon, on the one hand, the lack of tangible assets and, on the other, the appearance of two of the four drivers working for GEFCO after their dismissal and/or resignation by CCD. Brook Lane above does not assist as that case was to do with the complexities of a transfer taking place in stages and on different dates.[22]In those circumstances, we detect no error in the Tribunal's approach to the matters which it was obliged to take into account and the appeal is dismissed. We hope this matter can now be resolved without a resumed hearing at the Employment Tribunal by agreement between GEFCO and the Claimant, with assistance from ACAS if necessary. CCD is dismissed from the case. We would very much like to thank all of the representatives for their help. Appeal[23]An application has been made by Ms Macro, as she put it, for the purpose only of protecting her clients, who are not here. She says our Judgment raises a novel point which could affect many cases and many employees and that there is a public interest in the pressing forward of the point relating to the de facto transfer of two employees in this case. She contends that it raises issues as to the application of Litster and of Brook Lane . In our judgement, that puts the case too high. These circumstances are highly specific for in our collective experience, we have not seen such facts. The money involved in this particular case is not high. Notwithstanding the de facto transfer issue, a sufficient number of Spijkers factors has been identified by the Tribunal and upheld by us. So, it would not be right to regard this point as giving an appeal against the Judgement a reasonable prospect of success or as denoting any compelling public interest for us to grant permission to appeal.