Mr M McCarrick v Mr C T Hunter
| Jurisdiction | England & Wales |
| Judge | Lord Justice Elias,Dame Janet Smith,Lord Justice Maurice Kay |
| Judgment Date | 30 October 2012 |
| Neutral Citation | [2012] EWCA Civ 1399 |
| Court | Court of Appeal (Civil Division) |
| Date | 30 October 2012 |
| Docket Number | Case No: A2/2012/0329/EATRF |
[2012] EWCA Civ 1399
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
THE HON MRS JUSTICE SLADE sitting with Lay Members
UKEAT/0617/10/DA
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Maurice Kay, Vice President of the Court of Appeal
Lord Justice Elias
and
Dame Janet Smith
Case No: A2/2012/0329/EATRF
Mr Edward Brown (instructed by Coleman-Ctts LLP) for the Appellant
Mr Shaen Catherwood (instructed by Wilsons Solicitors LLP) for the Respondent
Hearing date : 16 October 2012
The question in this appeal is whether the appellant, Mr McCarrick, has sufficient continuity of employment to bring a claim for unfair dismissal against the respondent, Mr Hunter. It is common ground that the answer to that question depends upon whether, when Mr McCarrick became employed by Mr Hunter, it was pursuant to a transfer of an undertaking or of a service provision within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE").
The facts.
The respondent, Mr Hunter, was managing director of the Waterbridge group of companies. The appellant commenced employment with Waterbridge on 7 November 2005. The group held a number of commercial properties and the appellant was employed with others to manage those properties.
On 3 February 2009 a contract was signed to transfer control of Waterbridge to a group of companies known as Midos. The shares were to be sold to a wholly owned subsidiary of Midos, WCP Management Limited ("WCP"). However, although the contractual documentation in respect of the sale was signed on 3 February 2009, there was a complicating factor. On that very day a winding up petition was lodged by Her Majesty's Revenue & Customs in respect of the Waterbridge group. The result was that the sale was at that time void and was only ratified much later, following court proceedings, in December 2009. However, notwithstanding that the sale was not achieved at that stage, Waterbridge agreed with Midos that some of the Waterbridge employees would transfer to WCP. There were 9 employees who were transferred on that basis, including the appellant, Neil Jeeves and Peter Hughes.
The appellant continued to be employed in the management of the properties until mid August 2009 and was paid by WCP Management Limited. However, on 14 August 2009 Aviva Commercial Finance Limited ("Aviva"), who was the mortgagee on the property portfolio attached to the sale of the Waterbridge companies, appointed receivers to assume control of the properties. These were what are colloquially known as Law of Property Act receivers.
The receivers, BDO Stoy Hayward, in turn appointed a new property management company, King Sturge, and the property management services ceased to be carried out by WCP. What happened thereafter was disputed before the Employment Tribunal but the Tribunal found, after hearing evidence, that the appellant with two of his colleagues, Mr Jeeves and Mr Hughes, then became employed personally by Mr Hunter. They were each paid by Mr Hunter. They were made available by Mr Hunter to assist King Sturge in the management of the properties but they were not employed by King Sturge, nor by the receivers, nor by Aviva. They apparently continued to carry out all aspects of the property management service save for the collection of rents. It is not clear from the decision of the Employment Tribunal whether they did that work entirely on their own or whether King Sturge employees also undertook that function. Their services were provided at no cost to the receivership. The reason Mr Hunter made their services available to the receivers in this way was, according to the Employment Tribunal, that he wished to maintain good relations with Aviva and the owner of the Midos group and was hoping that the receivership could be brought to a swift end and the sale to Midos completed. Mr Hunter believed that providing their services to the receivers would assist in achieving that objective. Subsequently the appellant was dismissed on 8 March 2010 and he claimed that his dismissal was unfair.
It is to be noted that the appellant is not claiming against the receivers nor is he contending that his employment ought to have been transferred to King Sturge. His claim is solely against Mr Hunter. The principal contention is that there was a transfer of a service provision effectively from WCP to Mr Hunter when he and his two colleagues left WCP to become employed by Mr Hunter personally and were allocated the property management work.
An alternative submission is that even if that was not a transfer of a service provision, the employment by Mr Hunter of the three individuals constituted the transfer of a business from WCP within the meaning of the TUPE Regulations.
If either argument is successful, Mr McCarrick's continuity of employment will have been preserved and he will be able qualify for the ordinary statutory right not to be unfairly dismissed. Conversely, if there was no relevant transfer, he will not be able to establish continuity and the Tribunal will have no jurisdiction to hear his ordinary unfair dismissal case. (There is apparently a separate claim of unfair dismissal for asserting a statutory right, when no qualifying period of continuous employment needs to be established.)
The legislation.
The TUPE Regulations are designed to protect employees caught up in the transfer of the business to whom they provide their services. When there is a transfer of an undertaking or part of an undertaking from one employer to another as defined in the regulations, the employees working in the undertaking are automatically transferred to the new owner, the transferee, together with their contracts of employment. Any dismissal connected with the transfer is automatically unfair (at least for those eligible to claim unfair dismissal) save where the employer can show an economic, technical or organisational reason entailing a change in the workforce.
The regulations are intended primarily to give effect to the European Directive known as the Acquired Rights Directive, the current version of which is Council Directive 2001/23/EC. In so far as the regulations are the domestic implementation of the Directive, they must be construed purposively to give effect to the aims of the Directive, even where this may involve some departure from the strict and literal application of their language: Litster v Forth Dry Dock and Engineering Co Ltd [1989] ICR 341 (HL).
However, the domestic regulations were altered in 2006 to extend protection even where there might be no transfer of an undertaking or part of an undertaking. Identical protection to that afforded to employees on transfers of an undertaking was extended by regulation 3(1)(b) to employees caught up in a situation where there is a change of service provision. This has no equivalent in the Directive. It applies where a client contracts out a service, or takes it back in-house, or transfers the service from one provider to another. Employees assigned to the service transferred will become employed by the new employer providing that service. In a case where the service is brought back in-house that will be the client itself. The concepts of an undertaking and a service provision are not mutually exclusive: many transfers of a service provision will also constitute a transfer of an undertaking, but this will not necessarily be the case.
Regulation 3 sets out the two types of situation where a relevant transfer may arise. Regulation 3(1)(a) deals with the transfer of a business or undertaking. It provides that 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;
A key concept is the economic entity. That is defined by regulation 3(2) as follows:
"In this regulation "economic entity" means an organised grouping of resources which has the objective of pursuing an economic activity whether or not that activity is central or ancillary".
The circumstances in which a change of service provision will attract the protection of the regulations is set out in subsection 3(1)(b). It says that the regulations will apply to:
"(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 on 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."
Regulation 3(3) then sets out the relevant conditions and in so doing identifies exceptional cases where the service provision change will not attract the protection of the regulations.
"The conditions referred to in paragraph (1)(b) are that—
(a) immediately before the service provision change—
(i) there is an organised grouping of employees...
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