Crystal Palace Fc Ltd and Another v Mrs L Kavanagh and Others

JurisdictionEngland & Wales
JudgeLord Justice Maurice Kay,Lord Justice Beatson,Lord Justice Briggs
Judgment Date13 November 2013
Neutral Citation[2013] EWCA Civ 1410
CourtCourt of Appeal (Civil Division)
Docket NumberCase No: A2/2012/3262
Date13 November 2013

[2013] EWCA Civ 1410

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL

EMPLOYMENT APPEAL TRIBUNAL (1 JUDGE)

REF: UKEAT035412SM

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Maurice Kay, Vice President of the Court of Appeal, Civil Division

Lord Justice Beatson

and

Lord Justice Briggs

Case No: A2/2012/3262

Between:
Crystal Palace Fc Limited (1)
CPFC 2010 Limited (2)
Appellants
and
Mrs L Kavanagh (1)
Mr D Moss (2)
Mr K Watts (3)
Mrs E Roake (4)
Respondents

Mr David Reade QC and Mr Martin Palmer (instructed by Walker Morris LLP) for the Appellants

Ms Charlotte Hadfield (instructed by DWF LLP and Hugh James) for the First, Third and Fourth Respondents

Mrs Jane Russell (instructed by Slater & Gordon) for the Second Respondent

Lord Justice Maurice Kay
1

When the current football season began in August 2013 Crystal Palace had just rejoined the elite of the Premier League. However, at the end of the 2009–2010 season they were near the bottom of the Championship and were in dire financial straits. The company which then owned them, Crystal Palace FC (2000) Limited was faced with the serious prospect of liquidation. It had been put into administration on 26 January 2010. The administrator was Mr Brendan Guilfoyle. Mindful of the fact that, as the Employment Tribunal (ET) found, the liquidation of a football club will often leave few or no assets to be realised for the benefit of its creditors, Mr Guilfoyle sought to sell the Club as a going concern. He was aware of the interest of a consortium led by Steve Parish. Any sale was bound to be complicated because Crystal Palace (2000) (as I shall refer to it) did not own the Selhurst Park stadium. That was owned by Selhurst Park Limited. On 12 February 2010 Selhurst Park Limited too went into administration and Price Waterhouse Coopers (PWC) were appointed administrators. Its principal creditor was its bank. Eventually, following complex negotiations, agreements were reached for the sale to the consortium. All formalities were completed by 19 August 2010, at which point the purchaser was CPFC Limited, rather than CPFC 2010 Limited as had been envisaged in June. Nothing turns on that late variation.

2

Lisa Kavanagh, Kevin Watts, Elizabeth Roake and David Moss were employees of Crystal Palace (2000) when it went into administration. They and some 25 others were given letters of dismissal by Mr Guilfoyle on 28 May 2010. Some were dismissed with immediate effect, the remainder with effect from 31 May. This case is concerned with the question whether the dismissals of these four named employees were unfair by reason of the operation of Regulation 7 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). TUPE contains the current transposition into domestic law of the requirements of Council Directive 2001/23 (the Directive) on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses etc. Regulation 7 of TUPE is headed "Dismissal of employee because of relevant transfer". It 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 X of the [Employment Rights Act 1996] (Unfair Dismissal) as unfairly dismissed if the sole or principal reason for his dismissal is –

(a) the transfer itself; or

(b) a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce."

As is customary, I shall refer to "an economic, technical or organisational reason entailing changes in the workforce" as an ETO.

3

It is common ground that the principal reason for the dismissals was not "the transfer itself" because, at the effective date of termination, no agreement had been reached in relation to the transfer. The issue is whether the principal reason for the dismissals was a reason "connected with the transfer" that was not an ETO. When the unfair dismissal claims came before the ET, it concluded that the reason for the dismissals was connected with the transfer and that it was an ETO reason. Accordingly, any liability arising out of the dismissals remained with Crystal Palace (2000) and did not pass to CPFC. The employees appealed to the Employment Appeal Tribunal (EAT) comprising Wilkie J, Mr G Lewis and Mr P Smith. The EAT came to the contrary conclusion. It held that, on the facts found by the ET, the correct analysis was that the employees had not been dismissed for an ETO reason and that liability for unfair dismissal had passed from Crystal Palace (2000) to CPFC (2010) or CPFC. On appeal to this Court, CPFC (2010) and CPFC seek to restore the decision of the ET. Before turning to the appeal, it is necessary to describe in more detail the factual background.

The facts

4

I have described how Crystal Palace (2000) went into administration. That was at the behest of Agilo Master Fund Limited which had lent it a sum in excess of £5million pounds. I have also described how Selhurst Park Limited was put into administration at the behest of its bank. In describing the next stages I gratefully draw on the summary contained in the judgment of the EAT. Having resolved to do his utmost to sell the Club as a going concern and to avoid the disaster of liquidation, Mr Guilfoyle advertised the Club for sale in the Financial Times on 9 February 2010. He already knew of the likely interest of Mr Parish and his consortium. By 18 February Mr Parish had signed a confidentiality agreement with Mr Guilfoyle. It soon became apparent that there were no other credible bidders. The consortium was incorporated as CPFC (2010) and was granted preferred bidder status. Unsurprisingly, the negotiations became complex because the consortium was only interested in acquiring the Club if it could at the same time acquire the stadium. In the course of negotiations, the respective parties adopted positions, sometimes in public, for tactical reasons and what they were saying did not necessarily represent their true thoughts and intentions. However, as between the consortium and Mr Guilfoyle, the terms of a sale purchase agreement were reached in May. On 24 May a copy of the agreement was signed on behalf of CPFC (2010) but it was held in escrow pending an agreement for the sale and purchase of the stadium. At that time, the football season had recently ended with the Club narrowly avoiding relegation from the Championship. Towards the end of May, Mr Guilfoyle found that the Club faced severe cashflow difficulties. Some short term relief was provided when Agilo loaned a further £1 million pounds to keep the Club going but that was soon exhausted. Negotiations with Mr Parish for a loan of £1.5 million pounds came to nothing when Agilo objected to its being given preferential ranking.

5

At this point the facts become critical and what follows is taken from the judgment of the ET.

"In view of the parlous funding position and the absence of an imminent purchase, Mr Guilfoyle decided, as he put it, to 'mothball' the Club over the closed season when no matches would be played, in the hope that it might be possible to sell the Club at a future date. To that end, he told Ms Hammond [his assistant] to ask Mr Alexander [managing director of Crystal Palace 2000] to produce a list of employees who could be made redundant, and still permit the core operations of the Club to continue during the closed season. Mr Alexander took his instructions from Mr Guilfoyle. During the administration, he managed the Club on a daily basis. Ms Hammond wrote to Mr Alexander as follows:

'Given the continued uncertainty over the sale of the stadium and therefore the sale of the Club, we have decided to sell the playing assets and mothball the Club's trading operations as of the end of this month. Could you please provide us with a list of employees divided by those you would wish to retain with you in a mothballed operation and those we can make redundant as of 31 May 2010?'"

6

Further email exchanges took place including one on 25 May when Ms Hammond related that:

"We have had no funding throughout May and we are now reliant on the sale of Darren Ambrose [the most valuable player] to discharge May's liability. Brendan … is concerned that we are not where we need to be with the sale of the Club and has therefore made the decision that we will not trade into June and that the CVA proposal will not be issued to creditors. We propose to make the majority of the administrative staff redundant on Friday and proceed with the immediate sale of the Club's more valuable players. Should your clients wish to prevent this course of action, we will require immediate funding and confirmation that the stadium sale has been agreed by no later than this Friday 28 May."

The email traffic continued into 28 May when:

"Mr Alexander met Mr Jani, the Club's Head of Finance, and prepared a list of staff to be made redundant, retaining staff who he believed would be necessary to continue to run the Club. The initial list was sent to Ms Hammond who replied that further redundancies were needed in order to receive costs sufficiently to allow the Club to continue to trade. Mr Alexander and Mr Jani prepared a revised list that was sent to Ms Hammond."

7

Much was going on at both ends of the negotiations which was, in the ET's words, "a fast moving transaction, with scope for misunderstandings". The judgment continues:

"On 28 May, the dismissal letters were given to the staff, signed on Mr...

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