ADI (UK) Ltd v Willer; ADI (UK) Ltd v Firm Security Group Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice May,LORD JUSTICE DYSON,LORD JUSTICE SIMON BROWN |
| Judgment Date | 22 June 2001 |
| Neutral Citation | [2001] EWCA Civ 971 |
| Court | Court of Appeal (Civil Division) |
| Date | 22 June 2001 |
| Docket Number | Case No: A1/2000/2782 |
[2001] EWCA Civ 971
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
THE HON. MR JUSTICE BURTON
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Simon Brown
Lord Justice May and
Lord Justice Dyson
Case No: A1/2000/2782
C Jeans QC (instructed by Rowe & Maw for the Appellant)
N Randall (instructed by Edwards Geldard for the Respondents)
Introduction
This is an appeal by ADI (UK) Ltd against a majority decision of the Employment Appeal Tribunal handed down on 18 th April 2000. The EAT dismissed ADI's appeal from a decision of the Employment Tribunal, also by a majority, of 23 rd October 1998. Leave to appeal was given by Mummery LJ, who said that the question whether there is a transfer for the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("The 1981 Regulations") continues to cause problems. He considered that the case deserved a full hearing in this court, even though the issue of transfer is usually a question of fact which is unappealable.
Facts
With one exception, the facts are uncontroversial. They were found by the Employment Tribunal as follows (omitting document references):
"ADI's business is contracting out staff to clients to provide security services. Its clients operate in a number of different activities which range from shopping centres to airports. The contract to provide security services at the Darwin Shopping Centre, Shrewsbury, began in August 1997. The existing security employees of Hillier Parker, the clients, were transferred to ADI. The CCTV, control room and clocking system remained the property of Hillier Parker but were essential to the security operation within the Centre. There was a locker room, a canteen and a monitoring room within the centre. The locker room and canteen were used by other employees of Hillier Parker. There had initially been a dispute about the payment of overtime to the transferred employees but we accept the evidence of Mr Willer that this had been settled after representative employees had visited the First Respondent's head office at Heathrow.
ADI employed nine security officers in Shrewsbury. They had no other contracts in the area, the nearest being at Birmingham International Airport.
In a letter dated 29 December 1997 ADI gave Hillier Parker three months' notice that they wished to terminate the contract. Hillier Parker agreed and following another letter, dated 19 January 1998 asking for an early release date this was agreed at 16 March 1998. It stated in part "The situation is getting worse due to the sickness record of the staff and we would appreciate an earlier date than the end of March to withdraw our services".
John Marlow held a meeting with ADI's existing security officers on 4 February intending to take them on. We accept Mr Marlow's evidence that the meeting became hostile when it became clear that the Second Respondent would not in the normal course of working expect overtime to be necessary. The hostility also arose because the Applicants were asked to fill in another form for completion of a vetting procedure. We accept that the Applicants declined to say that they would "come over" to the Second Respondent to Firm Security, and that finding is supported since the forms were left on the table in the room where the meeting took place and none were filled in and returned. The Second Respondent wrote to all the Applicants on 27 February 1998 informing them that none of them would be offered a position at the Darwin Centre and suggesting that they talked to their company "to clarify your future employment status with on the termination of the Darwin Centre contract".
The Second Respondent wrote to Hillier Parker on 17 February setting out the pros and cons of taking on the existing staff. There was a meeting between the Second Respondent and Hillier Parker on 18 February. This was followed by a letter from Hillier Parker to ADI informing them that the Second Respondent had been awarded the contract and they would be taking over the contract from 16 March 1998. In a letter dated 24 February, the Second Respondent informed the First Respondent that " … it is not our intention to take on the existing staff and [from Süzen and Betts] … it is apparent that the transfer of undertakings is not an issue in this situation.
An advertisement was placed in the local paper for security staff. It referred to uniformed customer liaison officers. The necessary numbers to cover the contract were appointed. The Second Respondents commenced operation at 6 am on 16 March 1998. The operation was essentially the same as before, although there was a greater emphasis on customer liaison and different uniforms were provided."
The Council Directives and the 1981 Regulations
The 1981 Regulations were made to implement Council Directive 77/187/EEC and there are numerous cases in the European Court of Justice and in this jurisdiction which grapple with the intractable problem of what at the fringes constitutes a transfer of an undertaking for their purposes.
The Council Directive recites that economic trends are bringing in their wake changes in the structure of undertakings through transfers of undertakings, businesses or parts of businesses to other employers as a result of legal transfers or merges. It was necessary to provide for the protection of employees in the event of a change of employer in particular to ensure that their rights were safeguarded. Article 1 of the 1977 Directive originally provided:
"1. This Directive shall apply to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger."
The scheme of the Directive was and is to safeguard the rights of employees of the transferor employer by providing that the transferor's rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall be transferred to the transferee. The transfer of the undertaking or business is not to constitute grounds for dismissal. If the contract of employment or the employment relationship is terminated because the transfer involves a substantial change in working conditions to the detriment of the employee, the employer is regarded as having been responsible for termination of the contract of employment or the employment relationship. Paragraph 5 of the 1981 Regulations provides that a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor. The employment takes effect after the transfer as if it had originally been made between the employee and the transferee. All the transferor's rights, powers, duties and liabilities are transferred. Paragraph 8 provides:
"(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 the 1978 Act and Articles 20–41 of the 1976 Order (unfair dismissal) as unfairly dismissed if the transfer or a reason connected with it is the reason or principal reason for his dismissal."
By paragraph 8(2), however, a dismissal of an employee is justified and not unfair if the reason or principal reason for dismissing the employee is "an economic, technical or organisational reason entailing changes in the workforce of either the transferor or the transferee before or after a relevant transfer". The same language appears in Article 4.1 of the Directive.
The 1977 Council Directive was amended by Council Directive 98/50/EC of 29 th June 1998. This took effect slightly after the events which were the subject of the proceedings in the Employment Tribunal and just before the Employment Tribunal's hearing. One of the amendments effected by the 1998 Council Directive was to amend Article 1 of the 1977 Directive so that it now reads:
"1.(a) This Directive shall apply to any transfer of an undertaking, business, or part of an undertaking or business to another employer as a result of a legal transfer or merger.
(b) Subject to subparagraph (a) and the following provisions of this Article, there is a transfer within the meaning of this directive where there is a transfer of an economic entity which retains its identity, meaning an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary."
This amendment was explicitly designed to reflect decisions of the European Court of Justice which considered the nature of a transfer for the purposes of the 1977 Directive. One of the preambles to the 1998 Directive explained that considerations of legal security and transparency required that the legal concept of transfer be clarified in the light of the case law of the Court of Justice. This clarification was not to alter the scope of the 1977 Directive as interpreted by the Court of Justice.
Notwithstanding the retention in the amended Article 1 of the 1977 Directive of the requirement for the transfer to result from "a legal transfer or merger", that requirement has been emasculated out of existence by purposive judicial interpretation. The literal words, and indeed the whole structure, of the Directive appear to require some legal relationship effecting a transfer between the transferor employer and the transferee employer, such as, for instance, might take place upon the assignment of an undertaking or the sale of a business. But the cases have eliminated the need to look for such an orthodox...
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