Taurus Group Ltd v Crofts & Anor (Transfer of Undertakings : Service Provision Change) [2012] UKEAT 0024_12_2205

EAT
Taurus Group Ltd v Crofts & Anor (Transfer of Undertakings : Service Provision Change)
[2012] UKEAT 0024_12_2205 · 2012-05-22
[1]This is an appeal by Taurus Group Limited (“Taurus”) against a judgment of the Employment Tribunal in Nottingham (Employment Judge Blackwell sitting alone) dated 18 October 2011. The Employment Judge held that the employment of Mr Neil Crofts had transferred to Taurus under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) – specifically as a service provisions change under reg.3(1)(b).[2]This appeal has focussed upon a judgment of the Appeal Tribunal reported since the hearing below: Hunter v McCarrick [2012] IRLR 274 . In that case the Appeal Tribunal decided that for there to be a transfer under reg.3(1)(b) the activities carried out by different contractors before and after the transfer must be carried out for the same client. This appeal concerns the application of reg 3(1)(b) and Hunter in the context of the change of ownership of a building at which security services are provided. The background facts[3]Mr Crofts was employed from 10 April 2007 by Reliance Security Services Limited (“Reliance”), now known as Securitas Security Services (UK) Limited. He was one of two people employed by Reliance as security officers at a building known as Glasshouse, which was a building housing student accommodation in Union Road, Nottingham. At the end of February Reliance told him that they had lost the contract to provide security services; but they also told him that, since the security undertaking would remain on site and would be delivered by Taurus, his employment automatically transferred to Taurus. This suited him; he wished to remain employed at the Glasshouse. But Taurus did not agree; and he lost his job.[4]Mr Crofts brought his claim (which is for unfair dismissal) against Reliance and Taurus. Reliance said that his employment had transferred to Taurus; Taurus denied it; and the matter was listed for a pre-hearing review to determine the matter.[5]The Employment Judge had very limited evidence as to the arrangements made in respect of the Glasshouse. Details of contracts and even corporate names are obscure. The following is, however, clear.[6]Reliance provides manpower and electronic security services throughout the United Kingdom. Its original contract to provide security services at the Glasshouse was with a property company called Ely Properties which eventually went into administration. When it went into administration management of the site was taken over by a company called CRM, who continued to pay Reliance for the security services.[7]The Glasshouse was acquired by the Mansion Group – another group of companies which specialises in the provision of student accommodation. On 17 February the Mansion Group emailed Reliance:
“We are taking over management of this site at the end of the month and wish to terminate the current agreement you have with the previous owners. In order to ensure a smooth transition of services can you contact me to discuss any issues you have.”
[8]In response Reliance referred to their contract with Ely Properties which, it stated, had been made in September 2007 and could only be terminated on the anniversary of its commencement. The Mansion Group replied:
“As you will be aware Ely Properties went into administration some time ago and the site was managed by CRM. Our solicitor has forwarded the following clause from the sales agreement we had with the owners at the time when we bought the property: Contracts relating to the Property The Seller shall use all reasonable endeavours to terminate all existing contracts in place in respect of the Property for the provision of any services, goods, management or otherwise prior to Completion. For the avoidance of doubt the Buyer does not accept any responsibility for nor any express or implied assignment of or other contractual duty in relation to any such contracts. I therefore am not obliged to give 3 months notice as The Mansion Group were not party to the agreement you have and under the terms of the sale are not bound by any of the terms. I therefore confirm that your services are no longer required on the site.”
[9]On 28 February Reliance emailed the Mansion House Group asking for contact details of the incoming contractor. They were told the contractor was Taurus. The Tribunal’s reasons[10]At the hearing evidence was provided by Mr Crofts and by Reliance. No evidence was provided by Taurus.[11]Solicitors for Mr Crofts wrote to the Tribunal; they argued that his employment had transferred to Taurus. As regards reg.3(1)(b) they argued that the client did not have to remain the same. They suggested that any other interpretation of TUPE would undermine its purpose – to protect the rights of employees when business transfers are made over which they have no control.[12]Reliance, represented by Mr Roberts (a solicitor), argued that there was a novation, so that its existing contract was novated to Mansion Group. In the alternative, it submitted that the solicitors for Mr Crofts were correct.[13]Taurus, represented by Mr Buckley (who appears for them again today), denied that there was a novation, and argued that since the client had changed, there was no service provision change within the meaning of TUPE.[14]The Employment Judge, after expressing surprise that there was no authority to cover a point which must frequently arise, largely accepted the submission of Mr Crofts’s solicitors. He said:
“In my view the client, for the purposes of paragraph 3(1)(b)(ii) is that person who from time to time requires the provision of services, in this case security services. […] if that is not the case and Mr Buckley is right then every time there is a transfer of ownership of a building or a managing company or managing agent change, then those employees such as Mr Crofts or cleaners would lose the protection of the TUPE Regulations. It seems to me that that cannot be right.”
TUPE[15]The following provisions of TUPE are relevant:
“2(1) In these Regulations – ‘relevant transfer’ means a transfer or a service provision change to which these Regulations apply in accordance with regulation 3 and ‘transferor’ and ‘transferee’ shall be construed accordingly and in the case of a service provision change falling within regulation 3(1)(b), ‘the transferor’ means the person who carried out the activities prior to the service provision change and ‘the transferee’ means the person who carries out the activities as a result of the service provision change;” 3(1) The Regulations apply to – (a) a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity; (b) a service provision change, that is a situation in which – (i) activities cease to be carried out by a person (‘a client’) on his own behalf and are carried out instead by another person the client’s behalf (‘a contractor’); (ii) activities cease to be carried out by a contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person (‘a subsequent contractor’) on the client’s behalf; or (iii) activities cease to be carried out by a contractor or a subsequent contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by the client on his own behalf, and in which the conditions set out in paragraph (3) are satisfied.

(a) may be effected by a series of two or more transactions …”

[16]For the most part, TUPE is intended to reflect the obligations of the United Kingdom under the Acquired Rights Directive. However, the concept of service provision change is a wholly new statutory concept which did not adopt terms from the Acquired Rights Directive.[17]The concept of service provision change was enacted in TUPE by virtue of section 38 of the Employment Relations Act 1999 . This provided:
“38 Transfer of undertakings (1) This section applies where regulations under section 2(2) of the European Communities Act 1972 (general implementation of Treaties) make provision for the purpose of implementing, or for a purpose concerning, a Community obligation of the United Kingdom which relates to the treatment of employees on the transfer of an undertaking or business or part of an undertaking or business. (2) The Secretary of State may by regulations make the same or similar provision in relation to the treatment of employees in circumstances other than those to which the Community obligation applies (including circumstances in which there is no transfer, or no transfer to which the Community obligation applies).”
[18]In Metropolitan Resources Ltd v Churchill Developments (in liquidation) [2009] IRLR 700 at paras 25-27 His Honour Judge Burke QC considered the origin and purpose of the new concept. Essentially it was to provide clarity in areas where provisions and concepts derived from the Acquired Rights Directive had proved difficult to apply. He held that a purposive construction of the new statutory concept was not necessary. There should be “a straightforward and common sense application of the relevant statutory words to the individual circumstances...” (para 28). Hunter v McCarrick[19]The essential facts of Hunter were the following. Mr McCarrick was employed by Waterbridge (whose managing director was Mr Hunter), running a small team who managed a portfolio of properties which it owned. In February 2009 Waterbridge agreed to sell those properties to Midos. Mr McCarrick’s employment (along with others in the team) transferred to a subsidiary of Midos. The team continued to manage the properties. However the sale was postponed; and in August 2009 a secured lender appointed receivers to assume control of the properties. Once the receivers took control there was nothing more for Mr McCarrick and his team to do. However, Mr Hunter, hoping to see the properties come out of receivership, employed Mr McCarrick and others in the team for some months to run a property management service.[20]When Mr McCarrick and Mr Hunter eventually parted ways, in March 2010, the question arose whether there was a service provision change within the meaning of TUPE in August 2009. The Tribunal found that there was. The Appeal Tribunal overturned that finding.[21]The Appeal Tribunal (Slade J presiding) said:
“2. The appeal raises the question of whether there can be a service provision change within the meaning of reg. 3(1)(b) when there is not only a change in the contractor providing services but also a change of client.”
[22]The Appeal Tribunal concluded:
“27. In our judgment ‘the client’ in Regulation 3(1)(b)(ii) refers back to a specific client. The specific client referred to earlier in the provision is the client on whose behalf the transferor contractor carried out activities. The use of the definite article ‘the’ must refer back to ‘any client’. Regulation 3(1)(b)(i) applies to contracting out activities which were carried out by the client himself, ‘a client’, and are to be carried out on ‘the client’s’ behalf by another person. Similar wording, ‘a client’, and ‘the client’, is used in Regulation 3(1)(b)(iii) dealing with contracting in. There is no warrant for the giving the words ‘a client’ and ‘the client’ different meanings in the different sub-paragraphs of Regulation 3(1)(b). As in Regulations 3(1)(b)(i) and (iii) ‘the client’ in Regulation 3(1)(b)(ii) is the same client as ‘a client’. 28. Conditions set out in Regulation 3(3)(a) must be satisfied for there to be a service provision change within the meaning of Regulation 3(1)(b). Regulation 3(3)(a)(i) refers to the person on whose behalf activities are carried out before the transfer as ‘the client’. In context ‘the client’ in Regulation 3(3)(a)(i) is ‘a client’ in Regulation 3(1)(b)(i), (ii) and (iii). Regulation 3(3)(a)(ii) requires a consideration of the intention of ‘the client’ with regard to the activities following the service provision change. The relevant intentions are those ‘immediately before the service provision change’. There is no warrant for giving a different meaning to ‘the client’ in 3(3)(a)(i) and in (ii). If ‘the client’ were to include the plural, whose intention would be relevant for the purposes of Regulation 3(3)(a)(ii)? Regulation 3(1)(b) which HH Judge Burke QC held was introduced to provide certainty would be rendered uncertain by such an interpretation.”
Submissions[23]On behalf of Taurus Mr Buckley submits that the Tribunal erred in law in holding that “the client” for the purposes of paragraph 3(1)(b)(ii) is that person who from time to time requires the provision of services. He says that there is a limit even to purposive construction, and if one were to apply even a purposive construction the Employment Judge’s conclusion goes beyond what is permissible. He relies on the decision in Hunter .[24]On behalf of Reliance Mr Andrew Stafford QC has explained to me the importance of the decision in Hunter for a firm such as Reliance. He submits that it is wrongly decided; and he informs me that it is to be considered by the Court of Appeal in October at a full hearing, permission to appeal having been granted.[25]He argues that the new concept of service provision change ought to construed purposively, contrary to the approach taken in Hunter (which followed Metropolitan Resources ).[26]He points to the terms of section 38 of the 1996 Act, which indicate that the purpose of section 38(1)(b) was to make “the same or similar provision” in circumstances other than those to which the Acquired Rights Directive applied. He argues that the provision would be starkly different if the concept did not include a change of client. Other provisions of TUPE must be construed purposively; there is nothing in the statutory language to suggest that fundamentally different canons of construction should apply to the concept of service change provision. He points to the words “howsoever effected” which apply both to a transfer of undertaking and to a service change provision.[27]Moreover, he submits, if the new concept was intended to introduce clarity and certainty, it will have failed to do so in a common, everyday, category of case. He says that upon a change of ownership of a building the rights of security staff will not be protected; it will be (as he put it) the “Wild West”, with no obligations upon an incoming owner to consult or even inform existing staff of their impending redundancy. He points to the ease with which avoidance measures might be taken.[28]I have recorded these submissions, but I have no doubt that I should follow Hunter . As a general rule the Appeal Tribunal will follow its own decisions, particularly where they are considered decisions after argument on the point, and where there are no conflicting appellate decisions. Hunter is such a decision; so, indeed, is Metropolitan Resources .[29]Mr Stafford then submits that it is possible to distinguish Hunter .[30]Firstly, he argues that prior to 28 February there must have been a period between contract and conveyance of the property in question. During that period the vendor will have held the property on trust for the purchaser; and his duty included a duty to “maintain the property in a reasonable state of preservation”: see Clarke v Ramuz [1891] 2 QB 456 . The provision of security services was within this remit; and therefore Reliance had two clients – the vendor and the purchaser. The singular includes the plural: section 6 of the Interpretation Act 1978 . Thus the purchaser (Mansion House) was a client of Reliance prior to completion.[31]I reject this submission. It does not follow that, because the vendor owes a duty to the purchaser to maintain the property in a reasonable state of preservation, the purchaser is the client of those whom the vendor engages to perform the duty. On any normal use of language, the vendor is their client. I would add that I doubt whether the provision of security services at student accommodation has much to do with maintaining the property in a reasonable state of preservation in the Clarke v Ramuz sense.[32]Secondly, he argues that as a matter of fact Reliance may have become the client of Mansion House prior to 28 February. He relies on the fact that Mansion sent the email dated 17 February terminating the services of Reliance. They were, as he put it, acting like the client in doing so; so the Employment Tribunal was entitled to find that for a time Mansion House was their client.[33]I reject this submission. The email dated 17 February is not a sufficient foundation for a finding that Mansion House became the client of Reliance. As the email dated 28 February makes clear, it means no more than that as the incoming owners of the property they no longer required the services of Reliance. There was no basis for any conclusion that Reliance became the client of Mansion House. The statement of Mr Venn, Reliance’s witness, set out no foundation for any such case.[34]It follows that this appeal must be allowed. There was no relevant transfer between the Reliance and Taurus. Reliance will be restored to the claim; and Taurus will be dismissed from it.