Spaceright Europe Ltd v Baillavoine and another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mummery,Lord Justice Richards,Sir David Keene |
| Judgment Date | 14 December 2011 |
| Neutral Citation | [2011] EWCA Civ 1565 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2011/0684 |
| Date | 14 December 2011 |
[2011] EWCA Civ 1565
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
HHJ RICHARDSON
UKEAT/0339/10/SM
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Mummery
Lord Justice Richards
and
Sir David Keene
Case No: A2/2011/0684
MR GAVIN MANSFIELD and MS CHARLOTTE DAVIES (instructed by MBM Commercial LLP) for the Appellant
MR KEITH BRYANT and MR SAUL MARGO (instructed by Messrs Jeffrey Green Russell) for the First Respondent
Hearing date: 17 th November 2011
Introduction
The claim is for automatic unfair dismissal. The appeal is about the construction and application of regulation 7(1) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). Some employees, including the claimant, were dismissed by the administrators of the transferor employer prior to a TUPE transfer. The dispute is whether the reason for the dismissal of the claimant was "connected with the transfer" so as to make the dismissal automatically unfair. The Court is faced with differences of approach by the Employment Appeal Tribunal (EAT) in a series of conflicting rulings since 1994 on the similarly worded regulation 8(1) in the previous manifestation of TUPE in 1981.
The appeal is from the order of the Employment Appeal Tribunal (EAT) dated 4 February 2011 turning down an appeal by Spaceright Europe Limited (Spaceright), against the decision of the Employment Tribunal (ET) sent to the parties on 30 March 2010.
The ET upheld a claim by Mr Bruno Baillavoine (the Claimant) for automatic unfair dismissal for a reason connected with a relevant transfer of his employer's undertaking. Spaceright was the transferee of the undertaking of Ultralon Holdings Limited of which the Claimant had been Chief Executive Officer from 3 September 2003 until it was put into administration on 23 May 2008.
A stark statement of the sequence of relevant events in 2008 is sufficient to set the litigation scene.
(1) On 23 May 2008 Utralon Holdings and its subsidiary Ultralon Limited went into administration. On the same day the administrators dismissed the Claimant along with 43 other employees. Both Ultralon companies subsequently went into liquidation.
(2) On 25 June 2008 the administrators sold the business and assets of the Utralon companies to Spaceright.
On the critical question the ET found that the reason for the dismissal of the Claimant (a) was connected with the relevant transfer and (b) was not a reason entailing changes to the workforce so that the defence of an economic, technical or organisational reason for the dismissal (ETO) in regulation 7(2) and (3) was unavailable to Spaceright.
The administrators' dismissal of the Claimant was accordingly automatically unfair. Although Spaceright had not dismissed the Claimant, it is common ground that any liability for that unfair dismissal had passed to it under TUPE as the transferee of Ultralon's undertaking.
Permission to appeal was granted by Rimer LJ on 4 May 2011 on the three grounds advanced by Spaceright:-
(1) Perversity.
The essence of the perversity challenge is that, in finding that the reason for the dismissal was connected with the transfer to Spaceright, the ET rejected, without giving reasons, the administrators' evidence pointing to a reason that was not connected with the transfer, namely an administration cost-saving reason.
(2) Misinterpretation of TUPE.
This ground is that the ET misdirected itself on the proper construction of regulation 7(1) relating to a reason "connected with the transfer" (my emphasis). The ET declined to follow the decision of the EAT in Ibex Trading v. Walton [1994] ICR 907. The EAT held in Ibex that, where administrators dismissed employees with the aim of making the insolvent business more saleable, it could not be said that the reason for the dismissal was connected with "the transfer" of the assets of the business effected some four months later, because, at the relevant date (the dismissal), there was only the possibility of a transfer. The particular relevant transfer that ultimately took place was neither in being nor in negotiation or in contemplation at the date of the dismissal. In short, there was not in existence, at the date of dismissal, an actual or prospective transfer for the dismissal reason to be connected with. Spaceright submits that the ET erred in law in (a) declining to follow Ibex and instead (b) following EAT decisions to the opposite effect in Harrison Bowden v. Bowden [1994] ICR 186 and Morris v.John Grose [1998] ICR 655.
(3) Wrong approach to ETO defence.
The final criticism is that the ET erred in its approach to the ETO defence. Although the EAT in fact agreed with Spaceright on this point, it went on to dismiss this ground of appeal because, on the ET's finding of facts, the correct application of the ETO defence led to the same result.
TUPE
TUPE implemented Council Directive 2001/23/EC of 12 March 2001 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 or parts of undertakings or businesses. Article 4 provides that:-
"1. The transfer of the undertaking, business or part of the undertaking or business shall not in itself constitute grounds for dismissal by the transferor or the transferee. This provision shall not stand in the way of dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce."
Regulation 7 (Dismissal of employee because of relevant transfer) reflects the language of the Directive by providing that:
"(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 1996 Act (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 already noted regulation 7(1) is in similar terms to regulation 8(1) in the TUPE of 1981.
ET decision
In arriving at its conclusion that the Claimant should be treated as unfairly dismissed by the administrators the ET set out in paragraph 13 of its judgment its detailed findings of fact including a finding that:-
"13.24 On 23 May administrators were appointed by the company's bankers Halifax Bank of Scotland: Mr Caven was one of the administrators. On the same day, the claimant was dismissed orally from his employment by Mr Caven. The administrators decided to continue trading the company's business with a view to selling it as a going concern. They dismissed a number of other employees. A letter was sent to the claimant at his former address, purporting to confirm the termination of his employment by Ultralon Limited. The claimant would not see a version of this letter sent to his true address until early July."
The ET's judgment also recorded, in sub-paragraph 13.26, the following answer given by Mr Robert Caven of Grant Thornton in response to a written questionnaire from the Claimant's solicitors. (The ET did not consider it necessary for Mr Caven to give oral evidence at the hearing, or to make a witness statement).
"The Claimant was employed as managing director of the company. This role became redundant on our appointment and given the high salary costs of the Claimant as compared to other employees, his role was identified as being one which the business could operate without and which would make significant cost savings. The Claimant was therefore made redundant on our appointment.
The Claimant carried out a unique role so there was no selection criteria other than as mentioned above."
Mr Caven explained that the administrators decided that the best way of achieving the objective of the administration was to attempt to sell the business as a going concern and that it was necessary to continue to trade the business while seeking offers from interested parties and to avoid a loss being incurred during this period. In a progress report on the administration dated 18 December 2008 Mr Caven explained that:—
"We obtained funding from the Bank in order to continue to trade whilst we undertook a marketing exercise for the business of the Company."
The ET's conclusions on the critical third question (i.e. the reason for the Claimant's dismissal and its connection with the transfer) were as follows:
"17. The third question is: what was the reason for the claimant's dismissal? Was it a reason connected with the transfer that is not an economic, technical or organisational reason of the employer, entailing changes in the work force of the employer? We bear in mind what Mr Caven said in response to the claimant's questions. It seems to us that the claimant, as a Chief Executive Officer, was redundant because no purchaser of the businesses from the administrator would require such an officer. The purchaser would either be an existing company with its own chief executive officer or it would be a new venture, where the chief executive officer would come from the ranks of the directors. It was therefore necessary for the administrators to dispense with the claimant's services.
18. We are faced with two authorities from 1994 which are to the contrary effect. In Ibex Trading the Employment Appeal Tribunal...
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