[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Michael Peters Ltd v Farnfield & Anor [1994] UKEAT 533_92_0809 (08 September 1994) URL: http://www.bailii.org/uk/cases/UKEAT/1994/533_92_0809.html Cite as: [1994] UKEAT 533_92_809, [1994] UKEAT 533_92_0809

[New search] [Printable RTF version] [Help]

BAILII case number: [1994] UKEAT 533_92_0809

Appeal No. EAT/533/92

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 7 & 8 September 1994

Before

THE HONOURABLE MR JUSTICE TUCKER

MR J R CROSBY

MRS P TURNER OBE

---

MICHAEL PETERS LTD          APPELLANTS

(1) MR I FARNFIELD

(2) MICHAEL PETERS GROUP PLC          RESPONDENTS

---

Transcript of Proceedings

JUDGMENT

Revised


 


---

APPEARANCES

For the Appellants MR P ELIAS QC

(OF COUNSEL)

MT T PITT-PAYNE

(OF COUNSEL)

Messrs Wedlake Bell

Solicitors

16 Bedford Street

Covent Garden

LONDON WC2E 9HF

For the 1st Respondent MR T WORMINGTON

(OF COUNSEL)

MR B NAPIER

(OF COUNSEL)

Messrs Harrops

Solicitors

Copsley Court

Gayhouse Lane

Outwood

SURREY RH1 5PP

For the 2nd Respondent NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE 2ND RESPONDENT


 


MR JUSTICE TUCKER: This is an Appeal by Michael Peters Ltd from the decision of an Industrial Tribunal Sitting in London on 3 December 1991 and March 1992 whereby they held; 1. There was a transfer of part of the Michael Peters Group PLC to the Appellants within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 1981 and 2. The Respondent's dismissal was unfair by reason of the provisions of Regulation 8(1) of those Regulations.

The Michael Peters Group PLC (the Group) have played no part either in the proceedings before the Industrial Tribunal or before us.

The Group was the holding company for 25 subsidiary companies in the United Kingdom and abroad. Their business was that of Design Consultancy which specialised in product branding and packaging design. By 1989 the Group and four of its subsidiaries had moved to premises at 3 Olaf Street, London. Those subsidiaries will be referred to as "the four companies".

The unchallenged finding by the Industrial Tribunal was that the Respondent was an employee of the Group, and not of all or any of the subsidiary companies, The Industrial Tribunal rejected the Respondent's evidence that at least 80% of his work was concerned with the four companies which were sold and that he spent only a small proportion of his time with the other companies.

The Industrial Tribunal found that the Respondent in his position as Chief Executive of the Group was responsible for overseeing the financial management and running of all the subsidiary companies. They found that the work which he did for the four companies was that of general administrative and financial planning as part of the Group and that since the transfer that work was being carried out by someone else.

By March 1990 a Company referred to as CLK showed an interest in purchasing the Group. Nothing came of it at that stage and another company then emerged as an interested purchaser. The Group encountered financial difficulties, and on 22 August Receivers were appointed to the Group and on the following day to its subsidiaries. On that day (23 August) there was a brief meeting between CLK and the Receivers and on 24 August CLK made an offer to purchase the Group and one of the four companies. On 25 August the Receivers indicated that there would be redundancies, and on 26 August they told the Respondent that he would be made redundant. They sent him a letter of dismissal the following day 27 August.

It is important to observe that at that time there had been no acceptable offer to purchase the four companies. The offer was made by CLK on 28 August and the deal was concluded with them on 30 August. The Industrial Tribunal found that at the time the Respondent was dismissed there were other potential transferees. There was evidence before them that a number of other companies were interested in making a bid. CLK's offer had not been accepted, and a fresh offer was not made until after the Respondent was dismissed. The Tribunal found that the Receivers were looking for a sale of firstly the whole Group, and later part of the Group, and that that sale which in law was a transfer, took place, albeit the transferee was not identified until after the Respondent had been dismissed. According to the Agreement made on 30 August the vendors were the four companies. The Group were not a party to the agreement. Nevertheless, the Tribunal found that assets owned by the Group in the shape of goodwill, book debts, office equipment and premises were in reality transferred to CLK. Therefore the Tribunal found that part of the Group was transferred to the Appellants.

The Tribunal considered the question whether there was a deliberate plan to void the Regulations, but found that there was not.

The Tribunal went on to find that the sale of the four companies, which involved including assets owned by the Group and its goodwill, was a relevant transfer and that therefore Regulation 5(l) applied.

The Tribunal found that the principal reason for the Respondent's dismissal was connected with the transfer because in order to achieve it, it was deemed necessary to reduce the number of staff employed by the Group. They therefore found that the principal reason for the dismissal was the offer itself rather than by reason of any secondary consequential restructuring arising from the decision to effect the transfer.

The submission of Mr Elias Q.C. on behalf of the Appellants is that on the findings of fact which they made, the Tribunal erred in law in reaching their conclusion. He submits that the crucial point is that the Tribunal found that the Respondent was responsible for the running of the Group - he had a Group role, and that the Respondent was not allocated or assigned to the part of the undertaking which was transferred. Mr Elias relies upon the facts that the Group was not a party to the agreement to sell, that at the time of the dismissal no transfer had taken place, and there were a number of interested purchasers.

In our opinion Mr Elias is correct in submitting that in order to succeed in establishing that the Appellants are liable for his dismissal, the Respondent has to prove the following matters:

lstThat he was employed by the transferor.

2ndThat he was part of the undertaking which was transferred.

3rdThat he was dismissed by reason of the transfer.

4thThat he was not dismissed for any economic technological or organisational reason.

1. Having regard to the finding that the Respondent was employed by the Group, the answer to the lst question depends upon whether or not the Group was the transferor of the undertaking which was transferred.

The Tribunal found that the four companies and the part of the Group's assets and functions which were transferred, were all part of one economic unit, whose business was to market Design Consultancy Product Branding and Packaging Design. They rely for this conclusion on the decision of the European Court of Justice in Hydrotherm Geratebau G.mb H -v- Compact Del Dott Inq Maria Andrioli & Sas (1985) CMLR 224. That was a case concerned with Community Competition law, where in the opinion of Lenz A-G an economic and not a purely legal approach is necessary, (see p.232). The 1981 Regulations with which we are concerned were made in order to implement Council Directive 77/187/EEC. As Browne -Wilkinson LJ observed in Berriman v Delabole Slate Ltd (1985) LCR 546 at p. 552:

"The purpose of the directive was "the safeguarding of employees etc in the event of transfers", and the Regulations themselves include in their name the words "Protection of Employment."

In our opinion it is not appropriate to apply a decision based on an economic approach to an employment situation. We do not consider it right to have regard to the concept of a single economic unit for the purposes of deciding the present case, and in our opinion the Industrial Tribunal were wrong to base themselves on the decision in Hydrotherm.

The expression used by Mr Elias is that it would be wrong to pierce the corporate veil, and to say that the business of the four companies was the business of the Group. He does not dispute that there was a transfer of some of the assets owned by the Group. However he tells us that the case was never argued on the basis that the Group transferred something independent of the four companies which constituted an undertaking in its own right.

We bear in mind the submissions made by Mr Wormington on the Respondent's behalf that it was the Group who owned the goodwill of the business, that only the Group was empowered to recover debts, that it was the Group who transferred the premises, and that the Respondent's functions went across to the Appellants.

Nevertheless we prefer the submissions made by Mr Elias, and in our opinion the Group were not and could not properly be found to be the transferrors of the undertaking which was transferred to the Appellants.

However, although in the circumstances of this case we find that four of the Group's UK subsidiary companies possessed transfer status, we recognise that there may be business and trading conditions under which subsidiary companies do not have discretion to determine their continued membership of their parent company. Whilst subsidiary companies have a legal entity, and clearly defined legal accountabilities, their ownership and ultimate accountability for performance and financial standards may well be vested in their parent company or Group of Companies. 2.

The question whether the Respondent was part of the undertaking which was transferred was a point which, we are assured, was argued before the Industrial Tribunal.

But unfortunately the Industrial Tribunal were not referred to another decision of the European Court upon which much reliance has been placed before us. That is the case of Botzen v Rotterdamshe Droogdok (1986) 2 CMLR 50, which was a case on Directive 77/187. At p. 57 the Court held that:

"An employment relationship is essentially characterised by the link existing between the employee and the part of the undertaking or business to which he is assigned to carry out his duties. In order to decide whether the rights and obligations under an employment relationship are transferred under Directive 77/187 by reason of a transfer therefore it is sufficient to establish to which part of the undertaking or business the employee was assigned."

It is in our view rightly submitted by Mr Elias that the organisational structure of the undertaking must be excluded, it being contemplated that there is a part of it to which the employee is assigned. The usefulness of the decision for our purposes is not undermined by the fact that in Botzen the Court was only concerned with the transfer of part of the undertaking.

Mr Wormington submits that Regulation 5 does not require that the employee should have worked exclusively in the part transferred, and he further submits that the Regulations are more generous than the Directive to the employee. We do not agree with this latter submission, though we note the former. We do not derive any assistance from the case of Gale v Northern General Hospital (1994) IRLR 292 in this connection. Mr Wormington instances several examples which he described as the integrated nature of the commercial activities of the business, which he submits justified the Industrial Tribunal in finding that the entire undertaking was transferred, and not simply the business of the four companies.

However in our opinion, the test enunciated in Botzen is the appropriate one to apply. Therefore the answer to the question whether the Respondent was employed in the undertaking or part of the undertaking transferred, depends upon whether he could be said to have been assigned or allocated to that part, to which the answer on the facts is plainly No. We feel that if the Industrial Tribunal had had the advantage of being referred to Botzen they would have arrived at the same conclusion.

Our decisions on the first two points (or indeed on either of them) are sufficient for this appeal to succeed. But in deference to the careful arguments which have been addressed to us, we also consider the remaining two points.

2. Was the Respondent dismissed by reason of the transfer?

In our opinion he clearly was. The Tribunal were correct in finding that the probable reason for his dismissal was connected with the transfer because in order to achieve the transfer it was deemed necessary to reduce the number of staff employed by the Group,


 


Much attention has been focused on the use of the definite article in the later part of Regulation 8(1). We see no significance in this. It is no more than a reference back to the words "a relevant transfer" in the earlier part of the Regulation. It has been held by EAT in Harrison Bowden v Bowden (1994) ICR 186 that it is not necessary for the actual transferee to have been identified at or before the moment of dismissal, and Mr Elias concedes that it is not necessary for an actual contract to be in place- it can be projected. In our opinion the later decision in Ibex Trading v Walton (unreported) is not inconsistent with Bowden.

3. Was the Respondent dismissed for an economic, technological or organisational reason within Regulation 8(2)?

The Industrial Tribunal having been referred to Wheeler v Patel (1987) ICR 631 found that he was not. They stated that they had had no evidence that satisfied them that the Respondent's dismissal was related to the conduct of the business:

"His dismissal came about in order to achieve the transfer that took place for that reason and no other."

In our opinion the Industrial Tribunal were entirely correct in coming to this conclusion. We are not attracted by Mr Elias' submission that the dismissal fell outside the Wheeler test because it went beyond the bare need to realise money, but was inextricably linked with the need to save the business itself, and that must relate to the conduct of the business.

For the reasons expressed under the first two heading, this appeal is allowed, and the decision of the Industrial Tribunal will be set aside.