Appeal No.	EAT/1029/99

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 22 February 2000

Before
THE HONOURABLE MR JUSTICE LINDSAY
MISS C HOLROYD
LORD GLADWIN OF CLEE CBE JP

LANDSCAPE MAINTENANCE LIMITED	APPELLANT

	RESPONDENT
MR D ASPDEN & OTHERS

Transcript of Proceedings

PRELIMINARY HEARING

Revised

	APPEARANCES

For the Appellant	Mr T Pitt-Payne
(of Counsel)
Fynn & Partners
70 Richmond Hill
Bournemouth
Dorset
BH2 6JA	

MR JUSTICE LINDSAY (PRESIDENT)		We have before us by way of a preliminary hearing the appeal of Landscape Maintenance Ltd in the matter D Aspden & Others against Landscape Maintenance Ltd.  

1.	In the May of 1999, there was a three-day hearing at Exeter under the Chairmanship of Mr A.D Puttick.  On the 29th June the decision was sent to the parties.  There had been five appellants, Mr Aspden and four others; the four others were all work colleagues of Mr Aspden.  

2.	The case hinged on whether there had been a relevant transfer (a TUPE transfer) from the applicant’s earlier employer, a Mr G.J.Wyett, who was the second respondent to the proceedings, and an alleged transferee from Mr Wyett, the first respondent, Landscape Maintenance Ltd.  The unanimous decision of the tribunal was that the claims against the second respondent, Mr Wyett, were dismissed.  The first respondent, Landscape, was held to have unfairly dismissed the applicants and Landscape was ordered to pay to the applicants sums which were specified in the decision.

3.	The layout of the contest, as it was at that hearing in Exeter, is set out by the tribunal in their extended reasons in paragraphs 1 and 2 as follows:

1.“Each of the five applicants seeks compensation for unfair dismissal from either Mr G J Wyett, his/her previous employer, if there is no transfer of undertaking,or from Landscape Maintenance Ltd, if it is found that his/her contract of employment transferred under the Transfer of Undertakings (Protection of Employment) Regulations 1981(herinafter “the regulations”).  
2. Mr G J Wyett (hereinafter “Mr Wyett) says that the contracts of employment transferred upon the transfer of his undertaking to Landscape Maintenance Ltd (hereinafter “Landscape”) and that he has not dismissed any of the applicants.  Landscape says that there was no transfer of an undertaking and that none of the applicants have ever been employed by it.  Mr Wyett concedes that if there was no transfer then there was dismissal by him of each applicant.  He says that this was for the reason of redundancy.  Landscape concedes that if there was a transfer then all the applicants were dismissed by it.  Landscape says that this was for an economical, technical or organisational reason.”

4.	The position was that Mr Wyett had held a sub contract from W S Atkins for the maintenance of some ground at a MOD base at Chivenor.  He took the view that it afforded work for 6 employees from 1993 to 1997.  Four of the applicants worked on that sub contract and, from 1997 onwards, all five of them did.  What the tribunal says is:

“We find that the five applicants (together with Mr D Lester, whose claim has been stayed) comprised the core workforce and a dedicated workforce for the Chivenor contract.”

5.	The nature of the work was described by the tribunal as follows in their paragraph 7

7. “We find that about 80% of the financial outgoings on the sub contract were for the costs of the employees and about 20% on machinery and other expenses.  This gives a good indication of the part played by the workforce.  We find that the work was labour intensive requiring skilled employees (some of whom had to be trained in special skills for the very purpose of the contract) who used – in the main – hand operated machinery.  Manpower was predominant in the completion of the sub contract.”  

Well, the sub contract to Mr Wyett from Atkins expired on the 1st January 1999.  Mr Wyett had tendered for a renewal but was unsuccessful.  Landscape, on the other hand had tendered and was successful and it was told so on the 17th December 1998, in other words before the new contract came into effect.  Mr Wyett faxed Landscape on the subject.  The tribunal says in their paragraph 11: -
 11. “On 17 December Mr Wyatt faxed to Landscape a nominal roll of the employees on site indicating that the regulations applied.  On the 22 December Landscape replied saying the Regulations did not apply.”  
6.	Mr Wyatt remained of the view that there had been and was to be a TUPE transfer.  In paragraph 13 the Tribunal says:

13.“On 30th December 1998, Mr Wyett wrote to Landscape saying that the regulations did apply and enclosing the applicants’ P45 tax forms.  Landscape returned the P45’s and informed Mr Wyett again that Landscape did not intend to apply the Regulations.  The applicants reported for duty at the Chivenor site on 5 January 1999 at the end of the Christmas break.  Mr Luke saw them there and told them that he knew nothing of the Regulations or whether they applied.  He said that the applicants were not employees of Landscape and had to leave the site.  He said that any question of payment of redundancy monies should be referred to Mr Wyett.  Mr Luke the Landscape Area Manager did say that anyone who wished could apply to Landscape for employment, and would be considered if any was available.  We find that he indicated that work would be available.  The applicants then left and Landscape took over the site.  When some of the applicants applied for work Landscape replied that none was available and that Mr Luke had said that work would be available.  These remarks should be interpreted as made out of sympathy and concern only.  Landscape has nine employees presently on site including four recruited locally since January 1999 for the purpose of carrying out the Chivenor and Atturm contracts.”
The tribunal says this of Landscape:
12.“It is clear to us that the decision to move that team [and that’s a reference to an experienced team of three employees that had been employed by Landscape at Bickley] was made without considering the employment position of the applicants to which it had been alerted by Mr Wyett and the tender documents.  We find that Landscape paid no lip service to the consideration of whether the regulations applied to this sub contract.  Landscape says that it has not attempted to evade the disadvantages of the Regulations.  Landscape says that it gave due consideration to whether the Regulations were applied.  It relies upon the advice sought from the trade federation.  We reject this.  We find that Landscape took scant notice of the clear indications in the tender document and Mr Wyett’s letters and has deliberately omitted to satisfy itself whether the regulations applied, and turned a blind eye to them. “

7.	That reference to the trade federation is reference to evidence from Landscape that Mr Rodgers, the Director, had sought advice from a trade federation in early December but the identity of the trade federation seems not to have been clarified and the tribunal, it seems, was neither shown the instructions or facts given to the trade federation or the answer that was received from the trade federation, if trade federation it was.

8.	The tribunal considered a very full list of authorities and they are the most relevant authorities on the point.  There are eleven authorities cited in the tribunal’s decision.  One of them is ECM v Cox 1162 [1998] IRLR 416 EAT.  It had not at the time been reported in the Court of Appeal.  The tribunal held, looking now at paragraph 17: -

17. “The ECM case, which considered the Suzen case (which was dealing with the service contract) said that an economic entity (as distinct from a mere activity) existed where the employees are dedicated to a particular service contract and where their continued employment is contingent upon the continued existence of that service contract.  If the employment of the dedicated employees would continue despite the loss of the contract then this is merely the loss of a customer and not a transfer.  The ECM case is quite specific in dealing with that part of Suzen dealing with the taking on of the major part of the dedicated workforce.  The transferee cannot evade his duty to take on a workforce in compliance with the Regulation merely by deliberately refusing to do so.  He cannot then be heard to say that because he did not take on the majority of the workforce, and therefore has not taken on the only asset in a service contract, that there has been no transfer.”   

A little later in paragraph 18 they say:
18.“If Landscape had not deliberately refused to comply with the Regulations to take on the dedicated workforce then the economic entity would have been readily identifiable and stable after transfer.”

In paragraph 19 they say:
19.“We find that the Regulations apply and that they were effective on 1 January 1999.  It follows that the applicant’s’ contracts’ of employment transferred to Landscape on 1 January 1999.  No work has been offered to them and it is conceded on Landscape’s behalf that this amounts to dismissal.”

9.	Reinstatement was not eventually sought and financial awards were made coming in all to roughly £20,000 split unequally between the five applicants.  Mr Pitt-Payne appeared for Landscape below and he appears before us on this preliminary hearing and his skeleton and his oral argument advances one significant ground of attack and it derives chiefly I think from a passage which we have already read, namely: -
18. “If Landscape had not deliberately refused to comply with the Regulations to take on the dedicated workforce then the economic entity would have been readily identifiable and stable after transfer.”

The skeleton argument put in by Mr Pitt-Payne (and this is a point that he did, of course, orally enlarge upon) says of paragraph 14: -
14. “This tribunal held that Landscape Maintenance had been guilty of a deliberate refusal to comply with the Regulations to take on the dedicated workforce.  With respect this glosses over an important distinction between two factual situations in “change of contractor” cases such as the present case.  First, there is the case where the incoming contractor chooses, for whatever reason, not to take on the employees of the ongoing contractor.  Secondly, there is the case where the incoming contractor chooses not to take on the employees of the outgoing contractor specifically in order to frustrate the application of the TUPE Regulations [that is where the emphasis stops].  ECM is an authority that in the second case the deliberate decision of the incoming contractor to seek to frustrate the TUPE Regulations cannot in itself be decisive as to whether or not the Regulations apply.  It does not follow that the TUPE Regulations will apply to every case in which the incoming contractor chooses not to take on the old contractor’s workforce, irrespective of the incoming contractor’s reasons for making that choice.”

10.	Well, this requires one to look at the ECM case in the Court of Appeal, but first, perhaps, it is appropriate to go to the final ruling in the Suzen’s case [1997] ICR 662 at page 672 under the beguiling heading of cost, one finds this:
“Article 1(1) of the Council Directive (77/187/ E.E.C.) at 14 February 1977 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 businesses is to be interpreted as meaning that the Directive does not apply to a situation in which a person who had entrusted the cleaning of his premises to a first undertaking terminates his contract with the latter and for the performance of similar work, enters into a new contract with a second undertaking, if there is no concomitant transfer from one undertaking to the other of significant tangible or intangible assets or taking over by the new employer of a major part of the workforce, in terms of their numbers and skills assigned by his predecessor to the performance of the contract.” 

That is the background against which the ECM case needs to be considered.  ECM in the Court of Appeal is reported at [1999] ICR 1162.  The judgement which attracted the concurrence of Lord Justices’ Henry and Laws was that of Lord Justice Mummery and at page 1167 he says as follows: -
“It was contended, however, that it was irrelevant to ask why a prospective transferee has chosen not to take assets or staff.  Criticism was made of the part played in the decision of the employment tribunal by the reference to the reasons why staff was not taken on by ECM namely seeking to avoid the application of the Regulation of 1981 by simply not giving an employee a contract.  The tribunal did not regard that as an appropriate way of interpreting the Regulations.  The appeal tribunal [1998] I.C.R. 631, 639E went further and said that it was a legitimate inference that ECM had refused to take on staff precisely in order to prevent the Regulations of 1981 from applying and that if they had been taken on then the Regulations would clearly have applied.”
And a little later he says: -
“In my judgement, this appeal fails on the ground that there is no error of law in the decision of the employment tribunal.”
On the next page at 1168 at E under the heading 2 one finds: -
“It is still the case that it is for the national court to make the “necessary factual appraisal” in order to decide whether there is a transfer in the light of the criteria laid down by the Court of Justice”.
“It is still the case that those criteria involve consideration of “all the facts characterising the transaction in question” as identified in Spijkers at para 13 of the Court of Justice, in order to determine whether the undertaking has continued and retained its identity in different hands.”
A little earlier, at 1168 c-d one sees: -
“In my judgement it is clear that, but for the argument about the scope and effect of the later decision in Suzen, there would be no possible ground of appeal in this case. ECM’s case has to be that Suzen makes all the difference.  It does not in this case.  The importance of Suzen has I think being overstated.  The ruling of Suzen should be seen its proper context.  (1) The court of Justice has not overruled its previous interpretation rulings in such cases as Spijkers and Schmidt.  This is clear not only from their continued prominence in the reasoning of the Court of Justice in its post Sΰzen decision in Sánchez Hidalgo v. Asociación de Servicios Aser (Case C-173/96) [1999] I.R.L.R. 136.”

And at 1169 Lord Justice Mummery says: 
“The tribunal was entitled to have regard, as a relevant circumstance to the reasons why those employers were not appointed by ECM.  The Court of Justice has not decided in Sΰzen or any other case that this is an irrelevant circumstance or that the failure of the transferee to appoint any of the former employees of the transferor points conclusively against a transfer.”

11.	The appeal against the decision of the Employment Appeal Tribunal was turned down in Elm.  So the Court of Appeal thus holds that it is not improper to look at why it was that the transferee does not offer work to the employees of the transferor who worked in the undertaking or partial undertaking transferred.  To fail to offer them work merely to seek to avoid there being a TUPE transfer can be taken into account.  ECM says that one can have regard to the reason why the existing employees are not taken on.  There is no apparent distinction in ECM (but, of course, there did not dare need to be, one there) between, on the one hand, a failure to take on the workers for any reason at all, and, on the other, a failure to take them on in order to frustrate the application of the TUPE Regulations.  But that is the distinction which Mr Pitt-Payne seeks to make and he says here that had only the tribunal properly directed itself to the matters it should have done, it would have recognised or might have recognised at any rate that here there was what he called a bona fide commercial reason for not taking on the existing work force, rather than merely an intent to ensure that the TUPE Regulations did not apply. 

12.	There is, as it seems to us, a real difficulty for him in that argument on the facts.  Landscape had an experienced team of 3 employees at Bickley and they decided to move that force to take over the sub contract which they hoped to gain and did gain, but it is quite plain from the findings of the Tribunal that the Tribunal regarded Landscape as a company of longstanding of wide experience, a company that had dealt with local authorities, with the Ministry of Defence and with large industrial customers and given that the sub contract transpired, as it seems from the passage we have already cited, to require 9 employees to serve it, it is surely difficult to encompass that Landscape could have thought that only 3 employees from Bickley could have done the job.  One has the situation, in other words, in which, to judge from the findings of the Tribunal, it would seem that Landscape would have had to take on other employees to satisfy the sub contract which it gained.  Moreover, Mr Luke, Landscape’s Area Manager, did say to these applicants that anyone who wished could apply to Landscape for employment and would be considered if any was available and the Tribunal as we have already cited said:-
“We find that he indicated that work would be available.”
But, when some of the applicants applied for work at Landscape, he replied (and this, again, is a citation from the findings) that none was available.  It was not that these particular applicants were unsuitable for the job but they were told that none was available, notwithstanding that earlier it had been said that work would be available.  And then we have, moreover, the significant finding that Landscape has in fact employed 9 employees on the site, including 4-recruited locally since January 1999 for the purpose of carrying out the contract.  It seems to us, that against that background, even assuming in Mr Pitt-Payne’s favour that the notion of a bona fide commercial reason was fully ventilated at the hearing, there was ample material on which the tribunal could have inferred that despite that argument it was really a deliberate case of Landscape seeking to avoid the application of the TUPE Regulations.  I revert to the last words of paragraph 18.
18. “If Landscape had not deliberately refused to comply with the Regulations to take on the dedicated workforce then the economic entity would have been readily identifiable and stable after transfer.” 
13.	There is undoubtedly a degree of tension between Suzen and ECM in the Court of Appeal.  Mr Pitt Payne has told us that leave to appeal to the House of Lords from the Court of Appeal in the ECM has been refused.  But it is the case that a Tribunal has to consider a whole list of features in order to determine whether or not there has been a transfer.  Every indication in this full finding by the Employment Tribunal conduces to the conclusion that there was careful consideration given to the whole picture derived from the evidence that was put in front of it.  We see it as possible for the Tribunal to have inferred, as they did, that there was a deliberate refusal by Landscape to take on the existing employees in order thereby to avoid the ordinary consequences of TUPE and, that being so, and with ECM saying that that is a factor that can properly been taken into account, we are unable to see any arguable error of law in the conclusion to which the Tribunal arrived.  

14.	No one factor is necessarily determinative in the task of deciding whether or not there is a TUPE transfer.  It is a matter of fact for the Tribunal; here we see no error discernible in the directions which the tribunal gave themselves on the law.  They had a full citation of authorities put in front of them.  There is no evidence said to have been given at the hearing which has been ignored in the Tribunal’s, finding and there are no findings identified before us which are said to have had no foundation at all derivable from the evidence which was given.  It cannot be said that this was a conclusion to which no Tribunal properly instructing itself on the law could have arrived.

15.	Mr Pitt-Payne has put before us an interesting argument, but, ultimately, we see it as foundering not so much on the law but on the facts in that in our view there was sufficient material for the Tribunal to have inferred the deliberate refusal on Landscape’s part, to which we have referred.  Accordingly even at this preliminary stage, having identified no arguable point of law, we must dismiss the appeal.