SECOND DIVISION, INNER HOUSE, COURT OF SESSION
Lord Justice Clerk Lord Osborne Lord Emslie	[2006] CSIH 36 XA125/05 OPINION OF THE COURT delivered by THE LORD JUSTICE CLERK in the APPEAL by WILMA MACKIE Appellant; against ABERDEEN CITY COUNCIL Respondent: from a decision of the Employment Appeal Tribunal dated 21 September 2005 _______

For appellant: O'Carroll; Lindsays, Edinburgh (Iain Smith & Co, Aberdeen)

For respondent: Napier, QC; Solicitor to Aberdeen City Council

14 June 2006

Introduction
[1] The appellant was employed by Smartex Limited (Smartex) from 28 October 2002 until 12 December 2003 when she entered the employment of the respondent. She resigned from that employment on 7 May 2004. She then lodged claims with the Employment Tribunal (ET) including the claim for unfair dismissal with which this appeal is concerned. Since the appellant's period of service with the respondent was not sufficient to entitle her to make that claim, the ET could entertain it only if there was a relevant transfer of her employment from Smartex to the respondent in terms of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981 No 1794, as amended) (the TUPE Regulations), which then applied (cf reg 5(1)). These regulations defined a "relevant transfer," as "a transfer from one person to another of an undertaking" (reg 3(1)), whether "effected by sale or by some other disposition or by operation of law" (reg 3(2)). An "undertaking" for this purpose included "any trade or business."

[2] By decision dated 24 September 2004 the ET held inter alia that there had been no such transfer and dismissed the claim. The appellant appealed to the Employment Appeal Tribunal (EAT). By decision dated 21 September 2005 the EAT dismissed the appeal.

The ET's findings in fact

[3] Smartex had a contract with the respondent by which they undertook, as project managers, to sub-contract with a number of component suppliers to deliver to the respondent an operational smart card system, the Accord Card, whose initial purposes were to enable cash-free payment to be made for school meals at the respondent's schools and for senior citizens' bus passes. The contract was for a fixed price and for a defined product. The implementation date was to be 31 January 2003. The respondent owned the premises occupied by the Accord Card Office and the equipment there, and the intellectual property rights in the Accord Card software.

[4] The contract narrated in its preamble that the respondent wished "to engage Smartex to act as its advisor in respect of certain defined matters, and to deliver the Project ... " It defined the Project as being "the delivery of Services and Deliverables so that upon Final Acceptance they are able to be operated in accordance with the Specification ... and utilised for the purpose of delivering the Accord Card Scheme into live fully operational use" (cl 1.25).

[5] The appellant began her employment with Smartex at the respondent's Accord Card office in Aberdeen on 28 October 2002 as Accord Card Office supervisor. She was the only Smartex employee working there. Before full implementation of the system, the appellant was engaged on a pilot project, at first in two schools, which involved considerable manual input. By September 2003 the system was operational in most schools.

[6] Because of slippage in the development period, the respondent started earlier than had been planned to recruit staff directly to work on the Accord Card system to ensure a smooth transition when the completed project was delivered. The respondent appointed Mrs Rhona Atkinson to be its Accord Scheme general manager in August 2002. In the course of 2003 it employed five more staff to the Scheme office, one of whom, Vivian Nicol, was appointed as the appellant's assistant. Miss Nicol's employment began in October 2003.

[7] Since the contract was coming to an end and since the appellant was then the only person fully trained to produce the Accord Cards, the respondent offered her, and she accepted, employment in the post of finance and administrative officer. Her employment with the respondent began with effect from 12 December 2003. The respondent sent her a letter dated 17 December 2003 headed "TUPE transfer and statement of employment particulars." This letter purported to confirm that the appellant had had a TUPE transfer from Smartex to the respondent with effect from 12 December 2003 and that the transfer was to the position of finance and administrative officer, her normal place of work being the Accord Office; but the letter also said that her period of continuous service for statutory employment rights ran only from the date of the commencement of her employment with the respondent. Attached to this letter there were a Statement of Conditions and a job description which defined the "Job Purpose" as being "to develop and thereafter co-ordinate and monitor all required reporting for the effective management of the performance of the Accord Scheme." There followed a list of major tasks and main activities.

[8] The appellant's main tasks were the development of financial and administrative systems to manage the Accord Scheme, the development and implementation of quality systems, and the collation and analysis of, and regular reporting on, performance information about the operation of the Scheme.

[9] After Vivian Nicol was appointed, part of the appellant's duties was to train her and supervise her. In January 2004 Mrs Atkinson told the appellant that she would show her her new duties once Vivian Nicol was ready to take over fully. These included organising travel for certain employees, budget monitoring and financial controls. However, no real start was made in these tasks because the appellant was signed off work on 13 February 2004 after complaining to her doctor of work-related stress. She did not return to work thereafter and resigned on 7 May 2004.

The decision of the ET

[10] The ET held that in deciding whether there was a qualifying TUPE transfer, it had to consider two questions; namely, (1) was there an undertaking? and (2) if so, was there a transfer of it? It held that the type of business conducted by Smartex in the present case was a one-off contract for the production of a smart card. Once that contract was completed, the respondent's business with Smartex was at an end, leaving no stable or discrete economic entity. There was no transfer of tangible or intangible assets. The appellant was and had been the only employee of Smartex who was located in Aberdeen and who was later redeployed by the respondent. There were no customers to transfer. While the appellant carried out some of the activities that she had carried out before 12 December, for example taking calls with queries, her training/supervision role, which the Tribunal understood to form a large part of her job, was new. So also were her job title and the tasks and activities contained in her job description.

[11] Even if it had found that there was a stable economic entity before 12 December 2003, the ET would have decided the second question in favour of the respondent on the ground that the business did not thereafter retain its identity. It held that the first stage of the Accord Card System was its creation and development; that that was a discrete phase in which the appellant was the sole employee in the location; that when that phase was completed, the card was to be put into currency, and that that was a distinct business activity. The ET next considered whether the job previously done by the appellant was still in existence. It held that the appellant's job with Smartex was to assist with the development of the card and to get it up and running. While part of her function in the initial phase was to pass on some of her expertise to her assistant, Miss Nicol, there was insufficient evidence to show that the job that Miss Nicol was assigned to do was the job that the appellant had been doing. Her contract with the respondent did nothing to support her contention that she continued to do the same job. The Smartex contract for creating and producing the Accord Card ended with delivery of the product. That entity, if there was one, did not retain its identity.

The decision of the EAT

[12] The EAT held that the ET had not erred in law. Smartex had a contract to perform a particular and clearly defined task which did not include being involved in the running of the use of the Accord Card once the development and pilot scheme stage had passed. That was a matter for the respondent only. The ET was therefore entitled to make the finding that the type of business was a one-off contract for the production of a smart card and that once that contract was completed, the business with Smartex was at an end. Therefore there could not be an undertaking to which the TUPE regulations applied (Decision, paras 29-31).

[13] The EAT also held that the ET was correct in concluding that in any event there could not be said to have been a relevant transfer. The statement in the respondent's letter of 17 December 2003 that the TUPE regulations would apply to the appellant's employment was not decisive of that question.

Submissions for the parties

[14] Counsel for the appellant accepted that the ET had asked itself the right questions; but he submitted that its answers to them were not supported by its findings in fact. He submitted that the appellant's contract with Smartex was a contract of a long-term ongoing duration which began before 12 December 2003 and continued thereafter in substantially the same form. Before the transfer date she was part of a specific group in the respondent's office who knew what was required to roll out the Scheme. After the transfer date, no one else in the office knew about it apart from the appellant and her assistant, whom she had to train. The Project was not completed by the date of the transfer. Her activities were the same after it. That was why the respondent employed her. Furthermore, in the letter to the appellant the respondent had shown an intention that the TUPE regulations should apply. There was no finding in fact that the respondent had any other intention. The ET therefore erred in reaching a conclusion that was contrary to the intention of the respondent on that question (Lightways (Contractors) Ltd v Associated Holdings Ltd, 2000 SC 262).

[15] Counsel for the respondent submitted that while the EAT had been correct in its analysis, the main focus was on the reasoning of the ET. Its conclusions could be attacked only on the basis of an error of law. Whatever other conclusions might have been reached on the facts, the issue was whether the ET's conclusions could reasonably have been reached. The appellant had failed to establish any error of law. It was not suggested that the decision was perverse. Both of the questions to which the ET addressed itself were questions of fact.

Conclusions

Was there an undertaking?

[16] In our view, the ET was correct in holding that for there to be an undertaking for the purpose of a TUPE transfer there has to be "a stable economic entity whose activity is not limited to performing one specific works contract, an organised grouping of persons and of assets enabling or facilitating the exercise of an economic activity which pursues a specific objective" (Decision, at p 5). The law on the point is conveniently summarised in Cheesman v R Brewer Contracts Ltd ([2001] IRLR 144, at para 10 (EAT)). Whether such an undertaking exists is a question of fact (Balfour Beatty Power Networks Ltd v Wilcox, [2006] IRLR 258, at para 13; Compass Services UK Ltd v Patrick, EATS/1264/99, 28 March 2000, at para 8; Telenor Business Solutions Ltd v Mackenzie, EATS/0016/03, 27 August 2003, at para 7). The ET examined the relevant contracts in this case and heard evidence from those principally involved. It concluded that Smartex's contract with the respondent was a short-term one-off contract by which Smartex developed and delivered a smart card system to be managed by the respondent, and was essentially at an end. It was therefore not an undertaking that could be the subject of a TUPE transfer (cf BSG Property Services v Tuck, [1996] IRLR 134; Numast v P & O Scottish Ferries, EATS/0060/04, 23-24 February 2005).

[17] Like the EAT, we consider that the ET's conclusion was correct on the facts, particularly in view of clause 1.25 of Smartex's contract (supra), which provided for delivery of the Scheme "into live fully operational use." There was therefore a fundamental distinction between the appellant's work under that contract and her work under her own contract with the respondent which related to the management of the delivered Scheme.

[18] But whether the ET's conclusion was correct is not the issue in this appeal. The sole issue is whether the ET was entitled to reach that conclusion, whatever other conclusions might have been drawn. In our view, there was ample warrant for it on the facts. Since the ET considered the right questions and applied the right test to both, its conclusion cannot be disturbed; and since the appellant must establish that the ET erred in law in its answers to both questions, that is sufficient to dispose of the appeal.

Was there a transfer?

[19] Although it is unnecessary to decide this question, we should say that we agree with the ET that the test is whether the entity that was transferred retained its identity and that that question may be determined by, inter alia, a consideration of the question whether its operation was actually continued or resumed (cf Cheesman v R Brewer Contracts Ltd, supra, at para 11). That too is a factual question. The ET concluded that the nature of the appellant's work with the respondent differed in nature from her work with Smartex. The one-off contract to create and produce the Accord Card ended with the delivery of the product to the respondent (Decision, at pp 6-7). There was therefore no continuity of the entity (cf Spijkers v Gebroeders Benedik Abattoir CV, [1984] ECR 1119 (ECJ)). Like the EAT, we consider that on this issue too the ET's decision was the right one; but it is sufficient for us to conclude, as we do, that its conclusion on the facts was one that it was entitled to draw.

The effect of the letter of 17 December 2003

[20] In reaching these conclusions, we reject the submission that the ET erred in finding that there was no TUPE transfer despite the respondent's intention, set out in the letter of 17 December 2003, that there should be. Even if the confused terms of that letter can be said to reflect such an intention, that intention cannot be a decisive consideration. Lightways (Contractors) Ltd v Associated Holdings Ltd (supra), on which counsel for the appellant relied, establishes that if the prospective new employer affirms its intention that the TUPE regulations will apply to the proposed transfer, that is a relevant consideration when the true nature of the transaction is being determined. But it is not conclusive. On the contrary, since the point goes to the jurisdiction of the ET, the applicability of the TUPE regulations must be decided on an objective consideration of all the circumstances. The Tribunal must dismiss an application like this if it finds on the facts that the regulations do not apply, whatever the new employer may have thought.

Disposal

[21] We shall refuse the appeal.