Appeal No. EAT/925/92

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 6th July 1993
	Judgment delivered on 30th July 1993

	Before

	THE HONOURABLE MR JUSTICE WOOD MC (P)

	MR T S BATHO

	MRS T MARSLAND

MR M E GREEN-WHEELER	APPELLANT

ONYX (UK) LTD	RESPONDENTS

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellant	Mr R Allen
(of Counsel)
Messrs Brian Thompson & Partners
Solicitors
17 Wellington Street
LEEDS
LS1 4DL

For the Respondents	Mr M Dencer
(of Counsel)
Messrs Pinset & Co
Solicitors
3 Colmore Circus
BIRMINGHAM
B4 6BH

MR JUSTICE WOOD (PRESIDENT):      Mr Green-Wheeler was the driver of a refuse collection vehicle.  From 23rd June 1975 he worked as such for the Richmondshire District Council ("the Council") in Yorkshire.  After due notice of some three months, he was, on Friday 6th December 1991 dismissed on the grounds of redundancy.  He received £5,000 redundancy payment.  By agreement he also took early retirement under the Council's scheme, received a lump sum and is in receipt of an annuity by way of pension.

	On Monday 9th December 1991 he was employed by the Respondents, Onyx UK Ltd (Onyx).  On 24th January 1992 he was dismissed by Onyx.  The reason given was his conduct or capability.  Mr Green-Wheeler alleged that the dismissal was unfair and claimed reinstatement.

	Onyx maintained that the Applicant had only been employed by it since 9th December 1991, and did not have the necessary 2-year qualification period to give jurisdiction.  It was for Mr Green-Wheeler to prove this.  He relied upon the Transfer of Undertakings (Protection of Employment) Regulations 1991 ("the Regulations").

	The Industrial Tribunal decided against him.  He appeals.  At all times he has been represented by his Trade Union, the National Union of Public Employees (NUPE).

	The Local Government Act 1988 required the Council to obtain competitive tenders for some of its activities, including refuse collection.  Neither we nor the Tribunal have seen the tendered documents nor the contract, but a relevant contract was entered into between the Council and Onyx commencing on Monday 6th December 1991.  All 27 previous employees of the Council took employment with Onyx.

	As part of the new arrangements for refuse collection Onyx took a leasehold interest in the part of the Council's depot at Gallowfields previously used for this purpose, in a garage at Hawes and in part of a workmen's car-park and rest-room.  In addition Onxy also bought from the Council four of the Council's vehicles pending delivery of new vehicles.  Subsequently Onyx made substantial alterations to the rounds of the employees and also reduced them in number.

	Those are the facts found by this Industrial Tribunal.  The reasoning of the Industrial Tribunal is to be found in paragraph 14 of its Decision as follows:
	"The Tribunal are unanimous that it is not for the Tribunal to dissent from the list of cases cited by Mr Denser and the pattern which they have established.  Accordingly, whilst congratulating Mr Caffety on the skill, effort and research which he has devoted to the applicant's case, the Tribunal must dismiss the applicant's claim."

	Mr Allen for the Appellant makes a number of points.  He submits that the reasoning of the Industrial Tribunal in that short paragraph is insufficient for his client to understand why that conclusion was reached and why he lost his case.  The other cases to which reference were made are, he submits, not identical on their facts and it was for the Industrial Tribunal to identify the "undertaking", to decide whether it came within the exclusion  "not in the nature of a commercial venture", and then to decide whether there had been any relevant transfer.

	Alternatively it was submitted that the Council's refuse collection was an "undertaking" within the scope of the Directive 77/187 ("the Directive").  There had therefore been a transfer of such an undertaking.  Secondly, that in the light of the amendment to be made by the Trade Union Reform and Employment Rights Act 1993, the limitation in Regulation 2(1), which related to the phrase "not in the nature of a commercial venture", should be ignored.  Thus, under EEC Law alone, the Applicant had the necessary continuous service.

	Alternatively he argued that continuous employment was obtained through an application of the Regulations.

	In the further alternative, it was submitted that the Council's refuse collection was in itself "in the nature of a commercial venture", and any transfer, if found, did not fall within the exception under Regulation 2(1).

	Finally, and lest it was a finding of fact namely, that the undertaking was "in the nature of a commercial venture", he argues that Mr Green-Wheeler can rely upon the provisions of paragraph 17(2) of the 13th Schedule of the Employment Protection (Consolidation) Act 1978.

	The case for Onyx was put on two grounds.  First, that there was no transfer.  A view taken on somewhat similar facts in two cases already decided in other Industrial Tribunals were brought to the notice of this Industrial Tribunal.  The first was in Brighton and the other at Bury St Edmunds.

	Secondly, Onyx submitted that there must be a "commercial venture" in existence before the relevant transfer; it was not enough for there to be a commercial venture only after transfer.

	We accept Mr Allen's first submission and are clearly of the view that the decision of this Industrial Tribunal was flawed upon the basis of Meek v. City of Birmingham District Council [1987] IRLR 250, 251 c.a.  It must therefore be set aside and the case remitted for a rehearing.

	There have been a number of recent cases which seem to be examples of the type of problem now arising out of the provisions of the compulsory competitive tendering requirements of the Local Government Act 1988 and the Regulations, which we have grouped together for consideration.  This is one.  We have been asked to consider and express broad views because there are literally hundreds of cases awaiting trial and the amount of money being expended by employers and Trade Unions could be considerably reduced if we did so.

	Although it was not argued below, we turn to paragraph 17(2).  The computation of a period of continuous employment is relevant in considering a qualification period in order to give jurisdiction to an Industrial Tribunal both in connection with the right not to be unfairly dismissed (S.54) and any claim to redundancy (S.81).  By S.151 the computation is to be "in accordance with the provisions of this section and Schedule 13".  We considered these provisions in some detail in Macer v. Abafast Ltd [1990] ICR 234.  Paragraph 17(2) reads:
	"If a trade or business or an undertaking (whether or not it be an undertaking established by or under an Act of Parliament) is transferred from one person to another, the period of employment of an employee in the trade or business or undertaking at the time of the transfer shall count as a period of employment with the transferee, and the transfer shall not break the continuity of the period of employment."

	Paragraph 12 of Schedule 13 states that once an employee - applicant - has accepted a redundancy payment then he cannot rely upon time previously served for the purposes of any future claim to redundancy, but that does not affect his qualification period for unfair dismissal.  Thus, if in the present case there was a transfer within subparagraph 17(2) continuity of employment is preserved for the applicant because he has only, as yet, relied upon the redundancy provisions of the 1978 Act.

	It is argued that the word "transfer" in paragraph 17(2), must be construed in accordance with EEC Law.  Reliance is placed upon Marleasing S.A. v. La Comercial Internacional de Alimentacion S.A. (Case 106/89)[1990] ECR I-4135.

	That case was considered by the House of Lords in Webb v. Emo Air Cargo (UK) Ltd [1993] ICR 175 in the speech of Lord Keith of Kinkel who commented as follows:
	"It is to be observed that the provision of Spanish law in issue in that case was of a general character capable of being construed either widely or narrowly.  It did not refer specifically to the grounds upon which the nullity of a public limited company might be ordered.  If it had done so, and had included among such grounds the case where the company had been formed with the purpose of defrauding creditors of one of the corporators, the Spanish court would have been entitled and bound to give effect to it notwithstanding the terms of the Directive.  As the European Court of Justice said, a national court must construe a domestic law to accord with the terms of a Directive in the same field only if it is possible to do so.  That means that the domestic law must be open to an interpretation consistent with the Directive whether or not it is also open to an interpretation inconsistent with it."

	We are unable to accept this submission for a number of reasons.  The courses of action given by the 1978 Act - the right not to be unfairly dismissed and rights to payments for redundancy - do not, as far as we are aware, find parallels in directives in EEC Law.  Secondly, the provisions of Schedule 13 are relevant only to the jurisdiction of a United Kingdom court.   Thirdly we are bound by a long succession of cases in the Court of Appeal which give clear guidance on this subparagraph.  However, because of the view we take of the Regulations - as we will later explain - it does not seem that the overall effect upon employees' rights will be material.

	Lastly, the question arose before us whether, if there had been a relevant transfer within the Regulations, continuity of employment could be carried forward so that Mr Green-Wheeler could rely upon his past service with the Council to found his qualifying period for his present claim of unfair dismissal.  If his service with the Council had been less than two years, then some doubt might arise; however, in the present case it can be said that at the date of his dismissal he had an accrued statutory right not to be unfairly dismissed by the Council.

	Article 3(1) of the Directive reads:
	"The transferor's rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer within the meaning of Article 1(1) shall, by reason of such transfer, be transferred to the transferee."

	We note the use of the word "obligations" and also that they may arise from "an employment relationship".

	Regulation 5(2) and (3) read as follows:
	"5-(1)  ...
		(2)  Without prejudice to paragraph (1) above, on the completion of a relevant transfer -

	(a)all the transferor's rights, powers, duties and liabilities under or in connection with any such contract, shall be transferred by virtue of this Regulation to the transferee; and
	(b)anything done before the transfer is completed by or in relation to the transferor in respect of that contract or a person employed in that undertaking or part shall be deemed to have been done by or in relation to the transferee.

		(3)	Any reference in paragraph (1) or (2) above to a person employed in an undertaking or part of one transferred by a relevant transfer is a reference to a person so employed immediately before the transfer, including, where the transfer is effected by a series of two or more transactions, a person so employed immediately before any of those transactions.

	(4) - (5) ..."
We note the difference between "rights and obligations" in the Directive and "the rights, powers, duties or liabilities" in the Regulations, but we take the view that at the date of his dismissal Mr Green-Wheeler had earned a statutory right against the Council not to be unfairly dismissed, and that this could fall within the words of "liabilities ... in connection with any such contract".

	However, Regulation 5(3) must be considered and in particular the phrase "immediately before the transfer".  In Litster v. Forth Dry Dock and Engineering Co Ltd (in Receivership) [1989] ICR 341, the applicants claimed unfair dismissal under Regulation 8 and presumably on the facts could have claimed constructive dismissal.  They sought to make their claim against the solvent transferee and not against an insolvent transferor.  There had been collusion between transferor and transferee and a manipulation of events.  Every merit was on the side of the applicants.  The House of Lords decided that in order to give effect to the Regulations as intended by the Directive, after the words in Regulation 5(3) "immediately before the transfer" should be inserted the words "or would have been so employed if he had not been unfairly dismissed in the circumstances described by Regulation 8(1)".

	One of the cases considered by the House of Lords and in particular by Lord Oliver of Aylmerton was Secretary of State for Employment v. Spence [1986] ICR 651.  In that case the Court of Appeal decided in favour of employees seeking redundancy payments and found that the gap in time between 11 a.m. and 2 p.m. on the same day meant that their contract of employment were not subsisting at 2 p.m. when the transfer took place because they had been dismissed at 11 a.m., and therefore it followed that they were entitled to succeed in their claim.

	Lord Oliver stressed that Spence was distinguishable from Litster on two grounds.  At p.369C he says:
	"It is worth noting that it was found as a fact by the industrial tribunal, first, that the sequence of events was as a result of independent action by the receivers and the transferees and that there was no collusion between them and, secondly, that the reason why the receivers decided to dismiss the workforce was that, until a contract would be renegotiatated with the Company's principal customer, there was no prospect of any work for the business.  It follows from these findings that the reason for the dismissal was not one connected with the transfer but was due to economic considerations, with a result that regulation 8(1) did not render the dismissals unfair.  The only question for decision therefore, was whether having regard to the very short time which had in fact elapsed between the dismissals taking effect and the conclusion of the transfer agreement, the workforce was employed "immediately before the transfer.  After a careful analysis of the cases, the Court of Appeal ... held that regulation 5(1) can apply only where, at the very moment of transfer, the contract of employment (in the sense of the existing relationship of employer and employee) is still subsisting.   If it is not, then there is nothing upon which the regulation can bite, even though the employment has been determined only a matter of minutes (or, it may be, seconds) before the transfer.  My Lords, for my part, I can detect no flaw in the reasoning ..."

	Thus, if the present Applicant can establish that his original dismissal fell within Regulation 8(1), he can rely upon his accrued statutory right.  We can see that it could well be said that if an applicant was not seeking to exercise his rights under Regulation 8, then Spence should be strictly applied.

	Are we bound by Spence?

	We return to the distinctions of fact taken by Lord Oliver in Litster.  In Spence the reason for dismissal was held not to be connected with the transfer and therefore Regulation 8 did not apply, therefore the two hour gap was fatal to the issue of transference and the applicants succeeded.

	However, if an applicant can show that the dismissal was for a reason connected with the transfer, then Regulation 5(3) is to be read with the meaning given in Litster.  The purpose of looking at Regulation 8(1) is to give proper effect to the intention of the Directive when applying Regulation 5(3).  If this is so, then we can see no good reason why an applicant should only be able to rely upon the provisions of Regulation 8 if he is seeking a remedy under that Regulation.  Once he has established that Regulation 5, as a whole, is effective and applicable, that is all he needs for his present purposes, namely the transfer of a statutory obligation of the transferor (his former employer) in connection with his contract of employment.

	That it was the intention of the legislature to include continuity of employment as transferring under the Directions is made clear in the speech of Lord Lyle in the House of Lords when the Regulations were passing through Parliament.  [HANSARD - 10th December 1981 - paragraphs 1482-1500]

	We are conscious of the comment that may be made that it is undesirable that jurisdiction under the 1978 Act should be achieved by two different routes, namely the Regulations and paragraph 17(2) with different principles applying to the word "transfer".  That may be, but in effect it seems that the breadth of the word transfer in the Regulations is wider than in Schedule 13 and that it is likely that, where applicable, reliance will be placed upon the Regulations.  However, different sets of facts may arise and we seek merely to assist in this difficult area of the law.

	It follows from the above that the appeal is allowed and the case remitted for a rehearing as directed by the learned Regional Chairman.

	Leave to appeal.