Woodhouse v Peter Brotherhood Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE BUCKLEY,LORD JUSTICE ROSKILL |
| Judgment Date | 08 May 1972 |
| Judgment citation (vLex) | [1972] EWCA Civ J0508-1 |
| Date | 08 May 1972 |
| Court | Court of Appeal (Civil Division) |
[1972] EWCA Civ J0508-1
In The Supreme Court of Judicature
Court of Appeal
Appeal by Peter Brotherhood Ltd. from order of the National Industrial Relations Court on 12th January, 1972, at the hearing of an appeal from the decision of the Industrial Tribunal.
The Master of the Rolls (Lord Denning)
Lord Justice Buckley and
Lord Justice Roskill
On appeal from the National Industrial Relations Court.
In The Matter of the Industrial Relations Act, 1971
and
In The Matter of the Redundancy Payments Act, 1965
and
In The Matter of an Application for the Determination of a Question Arising
Mr. CONRAD DEHN, Q.C., and Mr. P.N. LEGH-JONES (instructed by Messrs Linklaters & Paines) appeared on behalf of Messrs. Peter Brotherhood Ltd., Appellants.
Mr. PETER PAIN, Q.C., and Mr. L.H.C. LAIT (instructed by Messrs. W. H. Thompson) appeared on behalf of the Respondent Applicants.
In this case two men claim redundancy payments. Each worked for many years at a factory at Sandiacre in Derbyshire. Mr. Woodhouse worked there for 40 years as a machine tool setter Mr. Staton worked there for 24 years as a plater. But during their service the factory had been owned by two different firms in succession. Up to August 1965 the factory had been owned by Crossley-Premier Engines Ltd. and the men were employed by Crossleys; but in August 1965 the factory was bought from them by Peter Brotherhood Ltd. They took on the men and used the factory for their own products. In 1971 Peter Brotherhood dismissed the men for redundancy. Peter Brotherhood admitted that the men were entitled to redundancy payment, but they said it was to be calculated on their 6 years service with Peter Brotherhood. But the men said it ought to be calculated on the maximum of 20 years, seeing that each of them had been working at the factory for more than 20 years, at first with Crossleys and then with Peter Brotherhood.
The Industrial Tribunal, by a majority of two to one, held that the redundancy payments were to be calculated only on the 6 years of Peter Brotherhood. But the National Industrial Relations Court held that it was to be calculated on the maximum of 20 years; and there is now an appeal to this Court – the first appeal from the National Industrial Relations Court.
In order to determine the appeal it is necessary to state the facts relating to the sale of the factory in 1965. Crossleys, as engineers, were mainly engaged in the manufacture of diesel engines. In 1965 they decided to stop making those engines at their Sandiacre factory and to make them at their factory in Manchester. About the same time Peter Brotherhood, the big engineers of Peterborough, were anxious to expand. They wantedto find a factory in which to manufacture spinning machines, compressors and steam turbines. So a deal was arranged which suited both firms. Crossleys sold their factory at Sandiacre together with the plant and equipment to Peter Brotherhood for over half a million pounds. Much of the plant and equipment could be used by Peter Brotherhood for their work, and the men could go on working at their particular jobs just as before. Only the finished articles were different. Instead of diesel engines, it was spinning machines, compressors and steam turbines.
The takeover, however, was not entirely clean cut. In August 1965 Crossleys were building 4 or 5 diesel engines at Sandiacre. It was arranged that Peter Brotherhood should complete these engines and charge Crossleys with the cost. This was done by January 1966 and thenceforward the factory made no diesel engines at all. There was some special plant and equipment needed for those diesel engines. That was not bought by Peter Brotherhood. It was taken off by Crossleys to Manchester.
Another thing was that, before August 1965 there was some work being done at the factory in making spinning machines and so forth for Peter Brotherhood. It was done by Crossleys on sub-contract for Peter Brotherhood. After August 1965 Peter Brotherhood did it themselves, of course, as part of their general output from the factory.
Although there was this broad change in the ultimate products of the factory, nevertheless so far as the men were concerned, there was little change. In June 1965 Peter Brotherhood called the men together and offered them work on the selfsame terms as they had with Crossleys. All the men but one accepted the offer and stayed with Peter Brotherhood, with the same cards, the same pay, the same pension rights and so forth. Virtually thewhole labour force was transferred almost automatically to work for Peter Brotherhood. Their work was much the same as before, but the goods produced were different.
So far as the legal documents were concerned, Crossleys only transferred to Peter Brotherhood the physical assets. They transferred the land and buildings and the plant and equipment. They did not sell the goodwill, nor did they enter into any restrictive covenant. They did not assign their book debts or their work in progress. They simply wont off to Manchester and carried on their activities there.
Such being the facts, I turn to the law. Now at this time in August 1965 the Redundancy Payments Act 1965 nas not in operation. It was passed on 5th August 1965 and came into operation on 31st December 1965. If the Act had been in force in August 1965, I have no doubt that, when the factory was sold, the men would be taken to be dismissed for redundancy for the simple reason that Crossleys had ceased to carry on their business in the place where the employees were employed, see section 1(2)(a). But the Act was not then in force. So the men were not entitled to redundancy payment from Crossleys.
Now what is the effect of the transfer from Crossleys to Peter Brotherhood? It all depends on whether the "trade or business or undertaking" of Crossleys was transferred from one person to another within paragraph 10(2) of Schedule 1 of the Contracts of Employment Act 1963 which is to be read into and with the Redundancy Payments Act 1965, especially Schedule 1(1) and section 13 of it. I will not go into those provisions again because I went through them in Lloyd v. Brassey 1969 2 Q.B. at page 103. I there stated the effect of them and the previous cases in these words:-
"If the new owner takes over the business as a going concern - so that the business regains the same business but in different hands - and the employee gets the same job with the new owner, then he is not entitled to redundancy payment. His period of employment is deemed to continue without a break in the same job: so that, if he is afterwards dissmissed by the new owner for redundancy, his payment is calculated on the whole period in that job."
To that passage I would now add this: If the new owner does not take over the business as a going concern, but only takes over the physical assets - using then in a different business - then the workman is entitled to redundancy payment from the outgoing owner. He may be taken on by the new owner straight away and thus loses no wages, but nevertheless he is entitled to redundancy payment from the outgoing owner. It is, in a real sense, compensation for long service with that owner. In due course, if he serves more than two years with the new owner, and is afterwards dismissed by the new owner for redundancy, he will be entitled to redundancy payment from the new owner, calculated on his length of service with him.
So, by and large, the Act works fairly. The employee either gets one redundancy payment in respect of his entire service, or he gets two redundancy payments in respect of the two parts of it. But the trouble in this case is that the transfer took place in August 1965 before the Act come into force. So the men may only be entitled to the second period.
So the question is this, was there a "transfer" of the "business" or only a transfer of the "physical assets". If there was a "transfer" of the "business", the men get redundancy payments for 20 years service. If there was no transfer of the"business" but only of the "physical assets", they get it for 6 years service only.
This has been said to be a question of fact and degree. But I do not think this is quite right. In many of these cases the primary facts are not in dispute. The question is, what is the correct conclusion to be drawn from them. This involved the interpretation of the statute and is therefore a question of law. I explained this in British Launderers' Research Association v. Borough of Hendon Rating Authority (1949) 1 K.B. at page 473. If the Tribunal come to a conclusion which could not be reasonably drawn, then they go wrong in point of law and their determination can be corrected on appeal, see Edwards (Inspector of Taxes) v. Bairstow (1956) A.C. 14. In other words, if they draw a wrong conclusion from the primary facts, they go wrong in law. A striking illustation is Huggins' case (1971) 6 I.T.R. 164, where, on the selfsame primary facts, one tribunal found that there had been a transfer of a business: and another tribunal found there had not. So that one or other must have gone wrong in law. The Divisional Court, quite rightly, decided between them.
Likewise here, the Industrial Tribunal was divided in opinion. On the one set of primary facts, the majority thought that there was no transfer of a business but only a sale ofaasets: thereas the minority thought there was a transfer of a business in a broad sense. One or other must be wrong in law: and an appeal Court can and must decide between them. That is the value of expressing a dissenting opinion. While an appeal Court always hesitates long before overriding an unanimous decision, it does not feel the same reluctance when there has been a division of...
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