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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Celtec Ltd v. Astley & Ors [2001] UKEAT 293_00_0510 (5 October 2001) URL: http://www.bailii.org/uk/cases/UKEAT/2001/293_00_0510.html Cite as: [2001] UKEAT 293__510, [2001] UKEAT 293_00_0510

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APPEARANCES

 

For the Appellant	Mr John Bowers QC (One of Her Majesty's Counsel) Instructed by: Messrs Mace & James 14 Oxford Court Manchester M2 3WQ
For the Respondents	Mr Daniel Oudkerk (of Counsel) Instructed by: Messrs Russell Jones & Walker Solicitors Swinton House 324 Gray's Inn Road London WC1X 8DH


 


MR JUSTICE HOOPER:

Introduction

1. The appellant is Celtec Limited ("Celtec"), the result of a merger in 1997 between the North East Wales Training and Enterprise Council ["NE Wales TEC"] Limited and Targed, the TEC for North West Wales. Celtec appeals from a reserved decision of an Employment Tribunal sent to the parties on 23rd December 1999. Following a five day hearing the Tribunal concluded that the three respondents had continuous employment from the start of their employment with the civil service to date under what is now section 218 of the Employment Rights Act 1996 ["the Act"]. At the material times the relevant provision was not section 218 of the 1996 Act but paragraph 17(1) of Schedule 13 of the Employment Protection (Consolidation) Act 1978 as amended. There is however no difference between the two provisions save only that, for stylistic reasons, section 218 uses sub-paragraphs. We shall therefore refer to section 218. The Tribunal also concluded that the respondent Mr John Astley had continuity of employment by virtue of the Transfer of Undertakings Regulations (Protection of Employment) 1981 ["TUPE"] and that all three respondents had continuity of employment by virtue of the Acquired Rights Directive No. 75/129/EEC ["the Directive"]. There was a further decision that concerned one of the respondents which is not relevant to this appeal.
2. The appeal raises a number of difficult issues. Towards the end of the second day of the appeal, due to last only two days, we had only heard argument on what the Tribunal described as "probably the most fundamental point in the case", namely when did the transfer take place. The appellant unsuccessfully contended for September 1990. The respondents successfully contended for a period starting in September 1990 and ending sometime in 1996. If the appellant were to succeed on this point, then the appeal would be decided in its favour. In those circumstances and with the agreement of counsel, we decided to give a reserved judgment dealing only with this point, leaving for further consideration any other of the points argued before the Tribunal, should that be necessary.
3. The appellant abandoned Ground 6 before the hearing and abandoned ground 2 during the hearing, whilst reserving the right to argue that ground on any appeal. By abandoning Ground 2 the appellant was (reluctantly) accepting that the Tribunal's conclusion that there was a transfer of an undertaking was one that could not be said to be perverse. The appellant did not, however, abandon ground 3 which alleges that the Tribunal ought to have considered whether the respondents were "assigned" to the undertaking which was transferred to the NE Wales TEC and alleges that, if the Tribunal had done so, the only rational conclusion would be that they had not been so assigned.
4. The cases of the three respondents were chosen as "selected lead cases from a total of 15 applications". The respondents had been civil servants employed in the Department of Employment and in 1993 resigned and took up employment with the NE Wales TEC. Although the Tribunal only decided three of the cases it was hoped that, in the light of the decision, the other twelve cases could be settled by agreement.
5. The respondents brought their cases before the Industrial Tribunal under section 11 of the Act. By virtue of that section, an employee may require a reference to be made to an Employment Tribunal to determine what particulars ought to have been included or referred to in the written statement of particulars of employment required under Part 1 of the Act. In his particulars of employment the respondent John Astley was told that the date of commencement of his continuous employment was 1st September 1993, the date he joined the appellant. He had in fact started working with the civil service in 1975. It was his case that he had continuous employment from that date. Julie Owens and Deborah Hawkes were each given dates of 1st July 1993, not taking into account their previous service as civil servants.
6. During the hearing the Tribunal heard evidence from the three respondents and from a former Chairman of Celtec, Mr John Troth, called by the respondents. The sense of betrayal and indignation felt by the three respondents and presumably by others in their position can be seen in their statements prepared for the Tribunal (pages 152-163).
7. The appellant called one witness, Mr Andrew Tabor, who is a Team Leader at the Department of Education and Employment. As the Tribunal wrote in paragraph 4 of the reasons: "He is a senior civil servant well acquainted with the policy and operational issues surrounding the creation of the TEC's".

The factual background- the establishment of the TEC's

8. Much of the background is set out in the Tribunal's extended reasons:

"2. In 1989 the government announced a new initiative for training in the 1990's and this included the establishment of Training and Enterprise Councils known as TEC's. There was a different scheme in Scotland where they were to be known as Local Enterprise Companies (LEC's). We are only concerned with the position in England and Wales, i.e. that of the TEC's. This was, as we find, a radical initiative. It was part of the contraction of the civil service and was also intended to provide a more effective liaison between training organisations and enterprise organisations, i.e. groups of employers with a view to delivering training that was truly needed by industry on a far more local basis than had hitherto been the case.

3. It was always anticipated that this initiative would take some time to implement and the staff concerned, who were all civil servants, were to be seconded to the newly created TEC's for a period of three years. In many cases it turned out to be shorter because the secondment was terminable at an earlier date as stated in the letters each secondee received. In some cases it turned out to be longer than three years because some secondees to the TEC's, applying to be taken back into the civil service, had their secondments extended until such time as the civil service had suitable vacancies for them to return to."

9. In paragraph 6 of the reasons the Tribunal stated:

"The TEC's are companies limited by guarantee. They have a board of directors drawn from local businessmen; there were some fifteen such directors in the case of the TEC in North-east Wales. The programme began in Wales before that in England so we are dealing here with incidents that date back as far as 1989 and 1990 when it is alleged by the respondent that the continuity of employment of the applicants may have been broken. This is the period we have to focus on to resolve this case. The government created the TEC's not by any legislation but by a process of policy initiatives and publications. The TEC's effectively had a monopoly on the management of all the training and enterprise activities previously carried on by the Employment Department in England and Wales and the TEC's were given free access to the information systems and database. Some 80 TEC's took over the work of the 60 previous area offices of the Department. We have found as an agreed fact that premises in Wrexham and in Bangor previously used by the Department of Employment as area offices were subsequently taken over by the TEC's. There was initially little change in the daily working routine of the staff concerned or in the tasks on which they were engaged."

10. Neither the Department or the TEC's offered training. Prior to the establishment of the TEC's, the Department arranged training contracts with local colleges, organisations or companies. The TEC's took over the existing contracts and later entered into new contracts. On the day that the TEC's took over, the only obvious sign of change would have been a change of name. The secondees, by and large, continued to do the same work in the same place as they had during their period with the Department.
11. A letter sent to Mr Astley in September 1990 concerning the secondment is an example of what volunteer secondees were told in 1990.

"TRAINING & ENTERPRISE COUNCILS: SECONDMENT OF TA STAFF ARRANGEMENTS FOR SECONDMENTFollowing your wish to volunteer to second to a Training & Enterprise Council (TEC), I am writing to offer you a secondment and set out the Terms and Conditions of Employment which will apply during it.

Your secondment to North East Wales TEC in the EO grade will begin on 17 September 1990 and last until 16 September 1993, unless your secondment should terminate earlier. At the end of this period, consideration may be given to extending the secondment for a further period by agreement between yourself, the Department and the TEC. Any period of secondment to another TEC will be the subject of a separate agreement.

During the secondment period you will continue to be a Civil Servant employed by the Department of Employment and as such will retain your normal pay and Terms & Conditions of Employment as embodied in the Department's Personnel Handbook. A summary outlining the main Terms & Conditions is enclosed with this letter. You may, if you wish, accept additional payments and benefits which may be offered by the TEC, but this will be for you to discuss and agree with the TEC. The Department of Employment accepts no liability for any agreement entered into between you and the TEC on such matters. The right to any such payments or benefits will cease at the end of your secondment and will not form part of your Terms & Conditions of Employment as a Civil Servant.

These arrangements will apply for the duration of the secondment period.

If you are willing to accept secondment on the basis set out, please sign the Declaration form enclosed with this letter and return it to me within seven days."

The arrangements did not permit the secondee himself or herself to bring the secondment to an end in the three year period.

12. We were told during the hearing that the first Chief Executive of the NE Wales TEC, Mr Harris, was himself a secondee who resigned from the civil service and joined the TEC in March 1993 (page 149).
13. The Tribunal was not given the precise dates on which the NE Wales TEC commenced business. It assumed that it was September 1990 (paragraph 20 of the reasons), an assumption not challenged before us.

The factual background- events following the establishment of the TEC's

14. On 16^th September 1991 the then Secretary of State, Michael Howard, wrote a letter to the Chairman of the TEC's Staffing Group for all the TEC's in England and Wales. The letter in its first paragraph referred to the "proposal to hold discussions about the ending of secondments" and went on to say:

"I am pleased to be able to let you know now the arrangements that will enable TEC's to become the employers of their own staff."

The letter points out that the transition involves complex issues "particularly relating to pensions and redundancy rights for secondees who have resigned from the civil service to take up offers of TEC employment".

15. The letter then proposed various arrangements to meet the concerns expressed by TEC's and secondees. In the penultimate paragraph Mr Howard wrote:

"Although the major decision has now been taken and the way ahead is much clearer I must emphasise that it may take some time before all TEC's are the employers of their staff. I would like all TEC's to have made the change on or before the end of their fifth full year of operation and will be asking Regional Directors over the next few months to discuss and agree with each TEC how they propose to take matters forward. These discussions will include the need to spread the transition so that TEC's can remain operationally effective and the Department is able to make suitable arrangements for redeploying staff returning from TEC's. We will try to be as flexible as possible and it may of course help if some TEC's want to move faster than others. But it would do the whole process considerable harm if TEC's were thought to be putting undue pressure on people to make early decisions. I would like to emphasise that secondees, TEC's and my Department have entered into secondment agreements for three years. Those agreements cannot be revoked without the agreement of all three parties."

16. The final paragraph referred to the fact that:

"We are also ensuring that staff and their Trade Union are aware of the information sent to the Chief Executives and that they are kept up to date as agreements are reached on the more detailed points."

17. In 1992 three of the NE Wales TEC secondees either died or took early retirement. The secondment of a few of the other secondees came to an end in 1992 and they were redeployed within the civil service. The majority of the secondees either resigned from the civil service in 1993 to early 1994 to join the TEC or returned to the Department at the end of their secondment. There were 5 secondees in the category referred to in paragraph 9 of the reasons (set out below), who retired, received handsome financial packages and joined the TEC the following Monday. In the NE Wales TEC all the secondees who were to join the TEC had done so by September 1993, with the exception of these five. All but one of those 5 joined the TEC in December 1993 and March 1994. Those who decided not to continue their secondment but did not subsequently become employees of the NE Wales TEC, did so in the period 1992-early 1995. Thus by early 1995 there were no further secondees in this TEC. (See page 149)
18. Figures produced before the Tribunal showed that the last three secondments in England and Wales ended in October 1996 (page 148). It was for that reason that the respondents contended for a transfer ending in 1996, albeit all that they had to show in their respective cases was that the transfer was not completed before they joined the NE Wales TEC in 1993.
19. The evidence showed that those secondees who, like the respondents, opted to join the TEC in mid-1993 were concerned that, if they exercised the right to return to the Department, there might not be suitable employment available (see e.g page 154). Mr Oudkerk also made the point that the work the secondees were doing was the work which they had done for many years and therefore knew very well.
20. In paragraphs 7-9, the Tribunal set out its conclusions about the circumstances of the terminations of the secondments:

"7. We have heard a considerable amount of evidence about the manner in which the staff were seconded and then were asked to take up direct employment with the TEC. It was always the plan that the staff would be seconded. When the TEC's originally started up they employed only a handful of their own staff in the whole of England and Wales. The project was staffed by secondees, all civil servants. The projected period of secondment was for some three years. After the three years, or just before secondees were asked to elect either to resign from the civil service and to take up employment with TEC or to revert to a role in the civil service. The applicants' first contention before us was that these resignations had not been freely given and, if freely given, they were certainly not given with the benefit of the fullest information. With hindsight the applicants feel that had they known they were about to lose their continuous employment they would not have volunteered to join the TEC's.

8. Having heard the evidence and arguments, in the final analysis, we are not persuaded that this was a relevant factor in deciding the issues we had to decide. It may be that applicants were not given the fullest information and indeed it may be that they, through their unions who negotiated with management, were under a misapprehension about the continuity of service being broken. The matter was certainly not given prominence or publicised greatly compared to other terms. Our starting point, however, has been the case of Collinson -v- BBC [1998] IRLR 238, EAT which is a modern statement of the law regarding continuity of employment. The parties cannot contract into or out of continuity of employment, it is merely a calculation according to Part 14, Chapter 1 of the Employment Rights Act. Similarly, when it comes to analysing whether there has been a transfer of an undertaking we did not need to determine whether these were free resignations or tantamount to dismissals or mutual agreements to leave the civil service. It might have been relevant were we considering unfair dismissals or a TUPE argument derived from Litster -v- Forth Dry Dock & Engineering Co Ltd [1989] IRLR 161, HL. That, in the final analysis was not the case. We should add that the respondent's consultant Colin McGrath's pessimistic view that these resignations were not freely given, did not finally influence our decision.

9. Another topic on which we heard a considerable amount of evidence which turns out not to bear on our decision is the fact that some secondees with the TEC's applied for and received generous voluntary early retirement ("VER") and/or voluntary early severance ("VES") payments from the Department of Employment and then joined the TEC's effectively without a break. They "retired" on the Friday and commenced work the following Monday. Indignation has been expressed about this from both sides and for our part we understand that. It may well be, as a matter of history, that the resentment felt by these applicants has prompted the present applications. No matter what has prompted them we have judged them on legal principles according to their merit here and have not been influenced one way or the other by the actions of those other employees."

21. Paragraphs 6.7 and 6.8 of a booklet prepared for staff contemplating an offer of employment with a TEC state:

"6.7 Seconded staff will not be compulsorily transferred to TEC employment but will be free to resign to accept any offer of TEC employment or to return to the Department at the end of their secondment period. The Department does not therefore believe that the period of Civil Service and TEC employment would be continuous for employment rights purposes and has drawn up its package on that basis.

6.8 If a Court or Industrial Tribunal were to judge in the future that both periods of employment were continuous for redundancy calculation purposes, the Department, irrespective of the reason for the redundancy or when it was declared, would meet a part of the TEC's redundancy payment obligations by reimbursing it the cost of the former secondee's accrued Civil Service redundancy entitlement at the date of resignation. This would be uprated to reflect annual changes in the Retail Price Index between the date of resignation and the TEC redundancy. The TEC would be responsible for meeting all other payments, however calculated, arising from the redundancy or for any other reason not covered above."

22. Notwithstanding what is set out in that booklet, the Union representative sent a note on 14th May 1993 to all staff telling them: "Any secondee transferring to T and E shall be deemed to have continuity of service." It was, we presume, the giving of this information (or similar information) which led the Tribunal to refer, in paragraph 8 of its reasons, to "a misapprehension" (see above).
23. The bundle (at page 93) contained the first page of a letter sent to Mr John Astley offering him employment in the TEC. The letter was dated 28 May 1993. Unfortunately the second page of that letter is missing from our bundles. As presented in the bundle there was, following that letter, a document which, at first sight, appeared to be the terms of the contract. We were told however that it contained the terms of an agreement between the Department of Employment and the TEC's dealing with their obligations to each other upon a secondee joining a TEC. Included within that document is the undertaking by the Secretary of State to reimburse a TEC should a Court or Industrial Tribunal subsequently decide that both periods of employment were continuous for redundancy calculation purposes. That undertaking followed concerns expressed by the TEC's in 1992. In November 1992, the then Secretary of State, Gillian Shepherd, told the TEC's that the Department would provide "under-pinning for the accrued civil service redundancy entitlements of former secondees in the event of a Court or Industrial Tribunal's ruling" that the employment periods were continuous for calculating redundancy compensation.
24. In a "Question and Answer Brief", which appears to have been before the Tribunal, the Department states its belief that the periods of employment would not be continuous:

"because staff will not be compulsory transferred to TEC employment. Secondees will be free to resign or accept TEC employment or to return to the Department at the end of their secondment period as they wish."

The answer went on to say:

"That is why the Department has introduced special contractual employment rights and redundancy under-pinning arrangements as set out in the information booklet."

The Question and Answer Brief supplemented the information provided in the information booklet.

The factual background- Mr Tabor's note

25. A detailed background to the establishment of the TEC's and their subsequent history can be found set out at length in a note by Mr Tabor (page 84-88), the contents of which were not challenged before the Tribunal (see page 40). Mr Bowers Q.C. placed particular stress on paragraphs 8-13 and 15 which read:

"8. As private companies TEC's were entitled to recruit their own staff and most if not all did so from the day they became operational. The Department of Employment wished to assist TEC's to become operationally effective as quickly as possible. As TEC's were new organisations, and the work to be undertaken required an understanding of the government policy that contracts were designed to deliver, the Department, with the agreement of TEC's, issued an invitation to staff in its Area Offices and elsewhere seeking volunteers for secondment to TEC's. This invitation was initially for a three year period. Whilst Area Office staff were given first preference, staff from Regional Offices and elsewhere in the Department were also able to volunteer. Just over 4,000 staff had volunteered to second by November 1991 when all 82 TEC's had become operational.

9. On secondment staff remained Civil Servants employed by the Department of Employment Group. They retained their Departmental terms and conditions of employment and had the right to return to the Department or wider Civil Service for redeployment when their secondment ended. As Civil Servants they remained subject to the Department's annual reporting and disciplinary procedures and those staff in membership of the Principal Civil Service Pension Scheme (PCSPS) retained membership of the scheme and accrued rights under the PCSPS.

10. Whilst TEC's welcomed the contribution made by seconded staff, they said that, as private companies, they would wish to employ all of their own staff on terms and conditions of employment determined by them. Many TEC Boards expressed concern that the reliance on seconded Civil Servants was inconsistent with their entrepreneurial status. Whilst never formally discussed there were also some doubts around a potential conflict of interest should a TEC secondee be asked to undertake activities that did not reflect government policy as determined through the annual contract. On 26 July 1991 the Secretary of State (then Michael Howard) announced that discussions would take place with TEC's, relevant trades unions and seconded staff about future staffing arrangements for TEC's. All staff were informed personally by letter of the discussions and told that they would be free to choose any offer of employment that a TEC might make, or to return to the Department or wider Civil Service for redeployment.

11. On 16 December 1992 [this should read 1991] Mr Howard announced that secondments would be phased out by the end of each individual TEC's fifth year of operation with the last secondment ending in October 1996. [We have set out extracts from that letter in paragraphs 14-16 above.] It was made clear to all TEC's and Seconded Staff, in writing, that the transition from secondment to TEC direct employment would be entirely voluntary. TEC's would be free to employ whom they wished: they would be under no obligation to offer employment to seconded staff or anyone else. Likewise, seconded staff would be free to resign and accept any offer of TEC employment made; or to remain Civil Servants and return to the Department or wider Civil Service for redeployment.

...

13. The individual contracts of employment of all seconded staff were with the Crown. All seconded staff were free to return to the Department for redeployment. Civil Servants returning from TEC secondment to work within a Regional Office, other arm of the Department of Employment Group, or the wider Civil Service were treated in the same way as any other civil servant seeking a posting. Where a civil servant was offered employment by a TEC, the Department provided access to a free, independent and confidential personal counselling service to ensure that staff could discuss and evaluate the options open to them. Eleven of the seconded staff at TARGED and ten of those at North East Wales TEC took up this opportunity. Where civil servants decided to accept an offer of employment with a TEC they terminated their employment with the Crown on a voluntary basis by resigning from the Department.

...

15. Following changes within the Department of Employment Group, including changes in the structure of the Employment Service, the setting up of TEC's, the market testing of certain functions, and the transfer of responsibility for certain functions to the Scottish Office, the Department determined that it had more staff than it required for its future business. While a recruitment ban and natural wastage facilitated downsizing the Department faced a surplus of staff in certain grades. In July 1993 therefore the Department's regions were authorised to introduce voluntary early retirement measures. In September 1993 all ED Group staff were invited to express interest in seeking the possibility of being released through Voluntary Early Retirement (VER) (for those aged 50 or over) or Voluntary Early Severance (VES) for those staff aged under 50. Information on this was sent to TEC personnel managers with a request that it be drawn to the attention of all seconded staff. Following the success of other measures it was decided almost immediately that the schemes be restricted to the Executive Grades. In November it was announced that there were very limited funds available and that it was possible that no one might be released on VES for certain grades. In February 1994 it was further announced that very few VES releases would be agreed in 1993-94 given the success of the VER scheme. Both schemes were wholly voluntary, with management reserving the right to decide who amongst those who expressed an interest might be released on operational and budget grounds. This facility operated was available across the Department but with Regional Offices determining plans appropriate for future local staffing requirements. The facility was not introduced as a mechanism for dealing with secondees but as part of wider operational business planning. Over all the ED Group experienced a period of considerable change. Staff in post figures for the Training Agency/ED Regions (including the Head Office in Sheffield) show a drop of some 6,815 from a high of 9,381 on 1/4/1989 to 2,566 on 1/4/1995 (source H M Treasury S.I.P. returns held by DfEE Personnel Management Information Unit)."

Previous consideration of the issue

26. The issue which we have to decide was considered by a Chairman sitting alone, Mr P Robjant, in Southampton on 30th July 1996. In that case Mr Robjant held that the applicant, Mr Maloney, did not have continuous employment and was not entitled to treat his service with the Department of Employment as being continuous with his employment in the Hampshire Training and Enterprise Council. The Tribunal in this case declined to follow that decision.

The legislative framework

27. Chapter 1 of Part XIV of the Act makes provision for continuous employment. Section 218 (1) provides that, subject to the provisions of section 218, the Chapter relates only to employment by the one employer. Section 218 (2) provides:

"If a trade or business, or an undertaking (whether or not established by or under an Act), is transferred from one person to another-

(a) the period of employment of an employee in the trade or business or undertaking at the time of the transfer counts as a period of employment with the transferee, and

(b) the transfer does not break the continuity of the period of employment."

The other sub-sections in section 218 give other cases where the continuity of the period of employment is not broken. They are of no assistance in this case.

28. If "the time of the transfer" was (and only was) September 1990 then "at the time of the transfer" the respondents were and remained employees of the Department of Employment. Thus section 218 (2) would not grant them continuity of employment.
29. It should be noted that there is a presumption in favour of continuity. Section 210 (5) provides:

"A person's employment during any period shall, unless the contrary is shown, be presumed to have been continuous".

30. The Directive was adopted in February 1977. The Preamble includes, amongst the recitals, the following:

"Whereas it is necessary to provide for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are protected".

31. The Directive was amended in 1998 (98/50/EC). It is not necessary to refer to the amendments.
32. Article 1(1) provides that the Directive shall apply to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger.
33. Article 2(1) defines the words transferor and transferee for the purposes of the directive in the following way:

"(a) 'transferor' means any natural or legal person who, by reason of a transfer within the meaning of Article 1(1), ceases to be the employer in respect of the undertaking, business or part of the undertaking or business;

(b) 'transferee' means any natural or legal person who, by reason of a transfer within the meaning of Article 1(1), becomes the employer in respect of the undertaking, business or part of the undertaking or business".

34. Article 3 (1) provides:

"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."

35. The Government sought to implement the Directive by enacting TUPE. Regulation 2(1) described a "relevant transfer" as "a transfer to which these regulations apply" and "transferor" and "transferee" should be construed accordingly. The term "undertaking" was defined as including "any trade or business but does not include any undertaking or part of an undertaking which is not in the nature of a commercial venture." The italicised words were deleted as from 30th August 1993 by the Trade Union Reform and Employment Rights Act 1993. Regulation 3(1) provides that "subject to the provisions of these regulations, these regulations apply to a transfer from one person to another of an undertaking situated immediately before the transfer in the United Kingdom or part of one which is so situated."
36. Regulation 3(4) provides:

"It is hereby declared that a transfer of an undertaking or part of one-

(a) may be affected by a series of two or more transactions; and

(b) may take place whether or not any property is transferred to the transferee by the transferor."

The italicised words were substituted by the Trade Union Reform and Employment Rights Act 1993 Section 33(1) and (3). Regulation 3(4) originally read:

"(4) It is hereby declared that a transfer of an undertaking or part of one may be effected by a series of two or more transactions between the same parties, but in determining whether or not such a series constitutes a single transfer regard shall be had to the extent to which the undertaking or part was controlled by the transferor and transferee respectively before the last transaction, to the lapse of time between each of the transactions, to the intention of the parties and to all the other circumstances."

37. Regulation 5(1) provides that:

"... a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking or part transferred but any such contract which would otherwise have been terminated by the transfer shall have effect after the date as if originally made between the person so employed and the transferee."

38. It was agreed by both Mr Bowers and Mr Oudkerk that the Act, the Directive and the Regulations all require the employee to be employed by the transferor at the time of the transfer. Thus, the determination of the time of transfer may, as in this case, be vital. The Directive in Article 3 refers to "an employment relationship existing on the date of a transfer". Section 218 protects a person who is an employee of the transferor "at the time of the transfer". Regulation 5(1) of TUPE achieves the same result by providing that that a transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor in the undertaking transferred.

The reasons given by the employment Tribunal for finding that there was continuity of employment

39. In paragraphs 11 and 12 the Tribunal defined what, in its judgment, was the undertaking transferred:

"11…. We should define what we think the undertaking is which was transferred: that is the management of the government funded post-16 vocational training and enterprise activities in England and Wales together with the information systems and database, some staff and some premises. That we think is a recognisable and definable economic entity. …

12. Further it was clear form considering Suzen and ECM v. Cox that the undertaking in question was 'a labour-intensive' undertaking and therefore the movement of staff from the Department to the TEC's was an important defining part of the undertaking and its transfer. Mr Malone [on behalf of Celtec], in a forceful argument based on BIFU v. Barclay's Bank contended that a 'mere' movement of staff would not constitute a transfer. We have not met that argument head-on because by defining the transfer in a broad way we have characterised the movement of staff as important transactions within a long transfer process."

40. In paragraph 20 the Tribunal turned to the issue of when the transfer took place for the purposes of the Regulations and the Directive:

"The seventh point we have to decide, and probably the most fundamental in this case, was the time of the transfer. Herein lies the novelty of the case. This question was raised in paragraph 23 of the Hampshire case but not answered. We have not been given precise dates but we assume that September 1990 which was when the North-east Wales TEC commenced business was the date on which the transfer commenced. We considered that the direct employment of previously seconded staff represented and constituted a transaction and it was one of series of steps in a very long process, which was a planned process predicted and envisaged from the start, which was to last several years. We have not encountered a case or been referred to a case where the business of transfer has taken some six years but that seems to be the case in the establishment of the TEC's. Regulation 5(3) of the Transfer Regulations provides as follows:-

"... where the transfer is effected by a series of two or more transactions the person so employed immediately before any of those transactions,"

referring to the employees whose rights are protected. In our view the transfer was a long process starting some time in 1990 as affects these applicants, and ending on a national basis some time in 1996. We have no need to look no further (sic) than 1994 in this particular case. That being the length of transfer there were several transactions. Our analysis is that each time a seconded employee became directly employed by the TEC there was another transaction and immediately before that transaction ("any transaction") that employee was employed by the transferor, i.e. by the civil service and therefore that employee's rights passed over to the transferee which was the TEC. We see no reason in principle why such a very long period should not be found to be a period of the transfer when that was the plan from the outset. It has been rightly said by the applicants that the setting up of the TEC was "an experiment". We also have considered the provisions in the terms of employment with the TEC which was to include a five year period of underpinning by the government of the TEC's liabilities. On being asked why the period of five years was chosen Mr Tabor told us that it may not be a coincidence that it is the period between elections. It was eminently possible that an incoming government with different persuasions might proceed to entirely dismantle the TEC movement and replace it with some other scheme. To that extent it was an experiment and the employees rights had to be protected against such contingencies, in fairness. The foregoing analysis is based on the Regulations. There is no provision in the Directive which deals with the timing of the transfer, so a fortiori the same reasoning and result can be reached under the Directive as under the Regulations." (Underlining added)

41. In paragraph 22 the Tribunal turned to the issue of when the transfer took place for the purposes of the Act:

"22. The eighth question is whether the continuity passes under Section 218 of the Employment Rights Act 1996 (at the time in question this was in Schedule 13 to the EPCA 1978). We have already found there was a transfer for TUPE purposes and by the same reasoning there is a transfer for Section 218 purposes. We were referred to the case of Clark & Tokeley -v- Oakes in the Court of Appeal. That case establishes that the words 'at the time of the transfer' must be regarded as a period of time rather than a point in time. Nothing that we have found in relation to the TUPE questions seems different in this respect. There was a planned period which, to use words from the case of Macer -v- Aberfast "related to the machinery of the transfer". What is remarkable in this case is the fact that the transfer was six years long. ... Our analysis is that during this long period of the transfer the secondees entered direct employment at different times. This, in our view, does not affect the smooth working of the Section to preserve their continuity day for day because the transfer was a period and the continuity is the sum of weeks worked. The sum had reached a certain amount at the point the applicants changed from being secondees to being directly employed by the TECs then their continuous employment was counted as a period with the transferee, namely the TEC. Similarly, as to our conclusion under TUPE, each time an employee changed from being secondee to being directly employed he was employed immediately before the change by the transferor Department of Employment. His rights crystallised against the TEC. Each change was a transaction in the long process of the transfer. We were influenced by the words of Mummery LJ in the Oakes case (Para 57) when he referred to the risk of "fortuitous timetabling" depriving employees of valuable rights. In this regard we should say, if it is not already clear, that we consider there has been no attempt whatsoever for these purposes or for TUPE purposes to engineer any particular outcome or to evade liabilities in the way the transfer has been structured. The rationale is justified in business and political terms."

42. In our judgment the Tribunal was right to approach the matter in two stages: What was the undertaking which was transferred? When was it transferred? Unless one knows what was the undertaking being transferred, it may be difficult to determine when the transfer occurred. We shall examine each conclusion separately.

Was the Tribunal right in its conclusion as to what was the undertaking which was transferred?

43. It will be remembered that the Appellant, in abandoning ground 2, accepted that the Tribunal's finding that there was a transfer of the undertaking was not perverse. What then was the undertaking?
44. In the passage from paragraph 11 of the Reasons (set out above in paragraph 36) the Tribunal found that the undertaking transferred was "the management of the government funded post-16 vocational training and enterprise activities in England and Wales together with the information systems and database, some staff and some premises". The Tribunal described that as a "a recognisable and definable economic entity." In paragraph 12 the Tribunal characterised the undertaking as "labour-intensive" and that "therefore the movement of staff from the Department to the TEC's was an important defining part of the undertaking".
45. Mr Bowers relied upon the use of the words "some staff" in paragraph 11. Given, however, what the Tribunal had said in paragraph 12, it seems very unlikely that the Tribunal meant by "some staff", only some of the secondees.
46. We did not understand Mr Bowers to be attacking the description of the undertaking transferred.
47. The well-known authorities both in this country and in the ECJ tend to concentrate on whether there has been a transfer rather than on the nature of the undertaking. However, it is well established, for example, that "very little is required to amount to something capable of being an undertaking" (see RCO Support Services Ltd. and Another v. Unison and Others [2000] I.C.R. 1502, at 1515 (E.A.T.), giving the example of "one cleaning lady and her organisation" the subject matter of Schmidt v. Sparund leihkasse der früheren Ämter Bordesholm, Keil and Cronshagen [1995] ICR 237 (E.C.J.)). Lindsay J. in RCO (page 1514 F-G), referring to ECM (Vehicle Delivery Service) v. Cox [1999] ICR 1162, noted that there can be an undertaking notwithstanding that neither significant assets nor a majority of the work force moves over.
48. In Argyll Training Ltd v Sinclair and Argyll & The Islands Enterprise Ltd [2000] IRLR 630 (EAT) the facts, as taken from the headnote, were:

"Margaret Sinclair was employed for more than two years by Business & Employment Skills Training Ltd (BEST) as a training adviser. BEST had a contract with Argyll & The Islands Enterprise Ltd (AIE) to provide training to local enterprise companies in the Argyll area. This consisted of in-house training and placement of trainees with employers in the area. Mrs Sinclair had sole responsibility for the placement side of training in the Argyll area. Best was paid by reference to a formula that related to the number of trainees on its books in any given week.

BEST lost its contract with AIE with effect from June 1998. It issued Mrs Sinclair with a redundancy notice terminating her employment. Argyll Training Ltd (ATL) subsequently took on 21 of 32 placement trainees on BEST's books who remained with a training provider."

49. The Employment Tribunal had held that there had been a relevant transfer from BEST to ATL within the meaning of TUPE, notwithstanding that there was no transfer of tangible assets and that Mrs Sinclair was the only employee capable of being transferred. The Employment Appeal Tribunal held that the Employment Tribunal was entitled to find that a training contract between BEST and AIE and the arrangements that BEST made in connection with the performance of that contract amounted to "an undertaking for the purposes of TUPE." The absence of the transfer of significant assets or of the transfer of a workforce did not prevent there being a transfer of an undertaking. Having considered both domestic cases and cases in the E.C.J., Lindsay J. giving the judgment of the Tribunal noted the breadth of permissible interpretations of the word "undertaking".
50. It follows that the description, given by the Tribunal in paragraphs 11 and 12 of the reasons, of the "undertaking" which was transferred cannot be faulted before this Tribunal.

Was the Tribunal right in its conclusion as to when the undertaking was transferred?

51. In the passage from paragraph 20 of the Reasons (set out above in paragraph 37) the Tribunal found that the transfer of the undertaking was "a long process starting some time in 1990 as affects these applicants, and ending on a national basis some time in 1996." The Tribunal accepted that this was, in effect, breaking new ground- no other case known to counsel has involved a transfer lasting more than a few weeks. In so far as the respondents were concerned the Tribunal added that there was no need to look further than 1994 in this particular case. Since Mr Astley became an employee in September 1993, the Tribunal, to reach the result it did, had to decide, at the least, that the time of the transfer was September 1990 to September 1993, a period of three years.
52. Mr Oudkerk's principal submission is that the Tribunal, having decided (to use his words) that "the movement of employees across was part of the machinery of the transfer", "it would be artificial to put a limit on the length of the transfer process". To put it another way, the Tribunal having decided that "the movement of staff from the Department to the TEC's was an important defining part of the undertaking and its transfer", the transfer was not completed until the secondment of all the September 1990 secondees had come to an end, in one way or another (e.g. by joining the TEC, by "returning" to the civil service or even by death).
53. Mr Bowers submits that merely by defining the undertaking in the manner which the tribunal did, cannot mean that the time of transfer is determined by "the last (wo)man across". Such a conclusion would bring with it too much uncertainty: "what if someone decided to extend their secondment to 2000?".
54. Mr Bowers pointed to various practical difficulties if the period of transfer is very long. If the transfer has not been completed before 1996, then a civil servant who was seconded to the NE Wales TEC in 1991 and accepted a job with the TEC in 1995, would have continuity of employment. On the respondents' argument, he would have been employed by the transferor at a time when the transfer had not been completed. Mr Oudkerk pointed out that this had not occurred and therefore had not been considered by the Tribunal. He submitted that if the civil servant was not seconded in September 1990, then he would not be part of the undertaking being transferred.
55. Mr Bowers also referred to the difficulties of, for example, fulfilling the duty to consult if the period is a long one (see Regulation 10 and following of TUPE). Mr Oudkerk submitted that it did not seem right that an employer could rely on the duty to consult employees to defeat the a claim by employees for continuous employment.
56. Mr Bowers' principal argument is that the test for determining the time at which the transfer is completed (the "termination point" to use his words) is that to be found in Teesside Times Ltd v Drury [1980] ICR 339 (CA), per Stephenson L.J., namely when the new employer is "in actual occupation and control of the old business". He submits that the Tribunal confused the machinery of transfer and its consequences. The transfer took place in September 1990, the consequences continued until 1996. To regard the taking up by each secondee of a job with the TEC as a transaction effecting the transfer is not, he submits, a viable interpretation of the Act, Directive or TUPE.
57. We turn to the many authorities cited to us, starting with the Teesside case, on which both counsel relied. Teesside is a (what is now) section 218(2) case.
58. An insolvent company transferred its business assets, premises and future contracts to the appellant Teesside Times Limited. At 4.30 on the afternoon of Friday October 17 1977 the receiver of the insolvent company told the employees that their employment with the insolvent company had terminated that day. That occurred at 4 p.m.. The purchaser of the company then read out a letter telling the employees that they were re-engaged from that day in their present capacities and that it was hoped that the employees would be offered permanent positions. At 6.30 that same evening the final agreement of transfer was signed. On the following Monday the respondent employee, Drury, went to work for his new employer, Teesside Times Limited. That night he was dismissed, as the Industrial Tribunal found, unfairly. Drury's right to compensation for that depended upon whether he had been continuously employed for a period of not less than 26 weeks ending with the effective date of termination. It was submitted by Mr Irvine QC, on behalf of the appellant, that the pre-transfer dismissal broke continuity of employment. The Court of Appeal dismissed the appeal on a short and technical ground relating to how periods of employment were calculated. However having been pressed by counsel to give guidance on the construction of what is now section 218 (2), the members of the Court expressed their opinions. In the words of Stephenson L.J.: "I therefore embark upon the expression of my own opinion, which must be obiter, with considerable hesitation." (page 351C)
59. Stephenson L.J. preferred the approach of Mr Tabachnik that the time of transfer was not a moment or point of time, but it was a period of time beginning before dismissal at 4 p.m. when agreement to transfer had been reached in principle and continuing until 6.30. Stephenson L.J.said:

"The first virtue of this construction seems to me to be that it read the phrase naturally as a whole and avoids its artificial fragmentation: 'the time' and 'the transfer' cannot and should not be considered separately; 'the time' of something must take its meaning from what that thing is, and if the transfer - of a trade or business or undertaking - is something which takes time, I would infer that 'the time of the transfer' more naturally means a period of time than a moment of time. A transfer of a business is, as Mr Tabachnik said, a complex of operations which are part of a continuous process through different stages, including dismissal and re-engagement of staff." (page 351 F-G)

60. He went on to say (page 352 C-D):

"The second recommendation of the more liberal interpretation of the words is that it makes it easier to identify the time of transfer by reference not to legal and technical considerations of which the employee knows and cares nothing, but to the actual state of affairs known to him. It enables the tribunal to consider the de facto, not the de jure, position, and to find a transfer at the time when the new employer is in actual occupation and control of the old business. In this case the employee knew nothing of the transfer arrangements but what he could learn from [what he had been told at about 4 o'clock]. He knew nothing of the time or place of signing the documents, and had no say in or control over the timing of their execution. And they might in another case be signed at a much later time and a different place, unknown to any dismissed employee." (Underlining added)

61. Stephenson L.J. pointed out the anomaly which would result if an employee did not happen to be present at the 4 p.m. meeting and thus was not notified of his dismissal until after the signing of the transfer documents. He continued (352 E-F):

"Can employees, intended to be treated exactly the same by arrangement between transferor and transferee, have their continuity of employment and their qualification for valuable payments preserved or broken on such accidental differences of time and place?"

62. Stephenson L.J.said that he preferred this construction because (352 F-G):

"it carries out the policy of the legislature to preserve continuity of employment when there is a change of employer and to carry over with that continuity the valuable accrued rights which would otherwise be lost."

63. Stephenson L.J. indicated that, in his opinion (353 G-H):

"there is no one stage in the process of transferring a trade or business or undertaking which can be excluded from the time of the transfer by any hard and fast rule, but the question when a trade, business or undertaking is transferred or what is the time of its transfer must be a question of fact and degree to be answered by industrial tribunals in the light of common sense and their knowledge of trade and industry applied to all the circumstances of the particular case."

64. Mr Oudkerk relied particularly on this passage and on the earlier cited passage in which Stephenson L.J. described a transfer of a business as "a complex of operations which are part of a continuous process through different stages, including dismissal and re-engagement of staff." He also relied on a passage to a similar effect in Allen v. Amalgamated Construction Co. Ltd [2000] E.L.R. 119 at paragraph 32 (E.C.J.):

"… a transfer of an undertaking is a complex and legal and practical operation which may take some time to complete".

65. Goff L.J. rejected (354H-355A) as "unrealistic and too uncertain" the submission that a transfer for the purposes of these provisions is: "an operation which may take place over a long period, beginning with the inception of negotiations or a least as soon as the parties have reached a firm understanding in principle." He said (355 A-C):

"One is directed by the paragraph to look to 'the time of the transfer,' which must I think refer to the moment when the transaction of transferring the business from one owner to another is effected, or such short period as is necessary to enable that to be carried out.

… I do not think that that moment or period is necessarily the time when legal instruments of transfer are executed, and, if it be a sale, the price is paid or secured, or perhaps earlier when a binding and enforceable agreement is entered into. If the transferee is let into possession and begins to carry on the business for his own account and at his own risk, I would think that that would be the time of transfer."

66. Eveleigh L.J. said at page 358 C-D:

"The transfer proceedings may take a few weeks. It may be difficult to select a point in time at which one can say the business was transferred."

67. Mr Bowers placed reliance upon Secretary of State for Employment v Spence and Others [1986] ICR 651, a TUPE case. On 16 November 1983 receivers were appointed to manage the employer, S. The receiver decided that there might be enough work to keep the employees working until February 1984. S did approximately 80% of their work for British Telecom. The representative of British Telecom told the receiver on 22 November that, unless the receivers had been able to sell S by Thursday 24 November, British Telecom would withdraw the contract and place its business elsewhere. It turned out not to be possible to conclude an agreement with a purchaser on or before 24 November. By Friday 25 November the receivers had found a possible purchaser but negotiations did not start until that evening. Given that the British Telecom deadline had passed, the decision had to be made quickly "in the interest of the debenture holders" (656F). Since there was no guarantee of a successful outcome to the negotiations, the receivers decided to cease trading and dismiss the workforce. On Monday 28 November the workforce were told at 11 a.m. that they were being dismissed with immediate effect. At 2 p.m. an agreement was reached between S, the receivers and the proposed purchaser. It was also at about 2 p.m. that the proposed purchaser concluded a fresh contract with British Telecom, a condition precedent to its acquisition of S's business. The following morning the purchaser re-employed the employees under fresh contracts of employment. The applicants claimed redundancy payments from S. The liability to make those payments was primarily that of S, but if S was insolvent it became the liability of the Secretary of State for Employment. The Secretary of State refused to make the redundancy payments and argued before the industrial tribunal that there had been a transfer of S's undertaking to the purchaser and that the applicants had been employed by S immediately before the transfer. If that was right, then the effect of TUPE was to continue the employees' contracts of employment with the purchaser. Accordingly they would not have been made redundant and were not entitled to redundancy payments. (See page 657H)
68. Balcombe LJ (at 660-661), with whom the other members of the Court agreed, set out the basic principle in English law that a man cannot be transferred from one employer to another without his consent. "Hence comes the rule that the sale or transfer of an undertaking determines the contract of employment of employees." "Without some statutory novation of the contract the transfer of an undertaking automatically determines contracts of service… ." (661 C-D) By virtue of regulation 5(1) if you have a relevant transfer the common law rule does not apply and the employee's contract of service is not determined. (661E) The paragraph has two effects first a relevant transfer does not terminate a contract of employment and secondly there is a statutory novation of the contract. Balcombe LJ said went on to say that regulation 5(1) (661 F-G):

"can clearly only relate to a contract of employment which is subsisting at the moment of transfer; otherwise there is nothing on which the regulation can operate."

69. He later said (663B-C):

"Applying that construction of regulation 5 to the facts of the present case, it is clear that the applicants were dismissed before the relevant transfer. Their contracts of employment were not existing at the moment of the transfer. There was nothing on which regulation 5 could bite, accordingly the Secretary of State is liable for redundancy payments."

Having considered the matter as if it were free from authority, Balcombe LJ went on to consider the authorities and, having done so, found that they did not require him to reach any different conclusion. Teesside was not cited to the court.

70. In Brook Lane Finance Co. Ltd v Bradley [1988] ICR 423 (EAT) Popplewell J. giving the judgment of the Employment Appeal Tribunal said, having considered both the Teesside case and the Spence case (430G- 431B):

"We are however faced with what, at any rate, appear to be two conflicting Court of Appeal decisions. It is clear to us that 'the time of transfer' must be construed in the same way in relation to the Employment Protection (Consolidation) Act 1978 as to the Transfer of Undertakings (Protection of Employment) Regulations 1981. Is the time of transfer 'a moment in time' or 'a period of time.' The Court of Appeal in Teesside Times Ltd. v Drury [1980] ICR 338 although obiter, plainly in the majority decision took the view that it could be over a period of time albeit per Goff LJ it might only be a short period so as to enable the transaction to be carried out. In our judgment we are bound by the decision of the Court of Appeal in Secretary of State for Employment v Spence [1986] ICR 651. It is plainly directly on point. Although Teesside was not cited, it postdates Teesside. The judgments in Teesside were obiter. The three Lords Justices were not speaking with one voice and accordingly we feel ourselves bound by the decision in Secretary of State for Employment v Spence."

71. Brook Lane Finance involved both (what is now) section 218(2) and TUPE.
72. Spence was considered in Litster v Forth Dry Dock & Engineering Co. Ltd (in Receivership) and Others [1989] ICR 341 (H.L.), a TUPE case. In that case, the House of Lords had to consider the meaning of the words "terminated by the transfer" in Regulation 5(1), the words "immediately before the transfer" in Regulation 5(3) and the relationship between those provisions and Regulation 8(1) the effect of which is that, if the or principal reason for dismissing an employee is a transfer, the dismissal is treated as being unfair. We take the facts and the history of the proceedings from the headnote:

"The 12 applicants worked for the transferor who became insolvent and went into receivership. The receivers agreed to sell the business assets to the transferee and one hour before the transfer took place the workforce were told by the receivers that the business was to close down and that they were dismissed with immediate effect. They were handed dismissal letters which stated that no further funds were available to pay their wages with effect from the close of business and that no payments would be made for accrued holiday pay or damages for failure to give them the statutory period of notice. Within 48 hours of their dismissals the applicants, learning that the transferee was recruiting labour, applied to be taken on but none were successful. Only three former employees of the transferor were taken on by the transferee who preferred to recruit elsewhere at lower rates of pay. The applicants made a complaint of unfair dismissal to the industrial tribunal against the transferor subsequently adding the transferee as an additional party to the proceedings. The industrial tribunal concluded that the applicants had been employed by the transferor in the business immediately before the transfer to the transferee within the meaning of regulation 5(3) of the Transfer of Undertakings (Protection of Employment) Regulations 1981; that their dismissal was for a reason connected with the transfer and was therefore unfair in terms of regulation 8(1); and that the liabilities of the transferor to the applicants in connection with their contracts of employment were transferred to the transferee by virtue of regulation 5(1) and (2). They held that the applicants had been unfairly dismissed by the transferor and that the transferee was liable to pay them compensation. On appeal by the transferee the Employment Appeal Tribunal affirmed the decision of the industrial tribunal. The Court of Session allowed an appeal by the transferee."

73. The House of Lords allowed the appeal. In the words of Lord Templeman (353H):

"Regulation 5(3) must be construed on the footing that it applies to a person employed immediately before the transfer or would have been so employed if he had not been [by virtue of Regulation 8] unfairly dismissed before the transfer for a reason connected with the transfer."

74. Lord Oliver, with whose reasons three of their Lordships agreed, said (363 C- 364 E):

"The necessary assumption in paragraph (1) of the regulation is that the contract of employment to which the consequence stated in the paragraph is to attach, is one which, apart from the transfer, would have continued in force and that what "terminates" it, or would, apart from the regulation, have terminated it, is the repudiatory breach constituted by the transfer. That paragraph can, therefore, operate only upon a subsisting contract. There is nothing in the terms of paragraph (2), if it stood alone, which necessarily involves the same restriction. It is, however, clearly intended merely to supplement the provisions of paragraph (1), and paragraph (3) supplies the connection by expressly limiting the operation of both paragraphs (1) and (2) to the case where the relevant employee is employed in the undertaking "immediately before the transfer," that is to say, to the circumstances envisaged in paragraph (1) in which, apart from the regulation, the event producing the termination is the transfer. The crucial question, therefore, is what is meant by the reference to a contract being terminated "by" a transfer.

This could embrace a number of different possibilities. If nothing at all occurs to disturb the relationship of master and servant apart from the simple unannounced fact of the transfer of business by the employer, it is the transfer itself which constitutes the repudiatory breach which, apart from regulation 5(1), "terminates" the contract. If, however, the employer, contemporaneously with the transfer, announces to his workforce that he is transferring the business and that they are therefore dismissed without notice, it is, strictly, the oral notification which terminates the contract; yet it could not, as a matter of common sense, be denied that the contract has been "terminated by the transfer" of the business, particularly when reference is made to the supplementary provisions of paragraph (2) of regulation 5 when read in conjunction with paragraph (3). Similarly, if the employer, a week, or it may be a day, before the actual transfer, hands to each employee a letter announcing that he is proposing to transfer his undertaking at the close of business on the transfer date, at which time the employees are to consider themselves as forthwith dismissed, it could hardly be contended under the Regulations that their employment had not been terminated by the transfer, even though, at the date of the notice, the dismissal might be capable of taking effect independently, in the event, for instance, of the actual transfer of business being postponed to a date or time later than the expiry of the notice. In each hypothetical case the employer's repudiation of the contract of service is differently communicated but its essential quality of a repudiation by the transfer of the undertaking remains the same and the contact can quite properly be described as having been terminated by the transfer. If, by contrast, the employer announces to his workforce that he is transferring his business to another person at 5 p.m. on the following Friday and that they are to consider themselves dismissed from his employment at 4.59 p.m. on that day, it is difficult to see any reason why the interposition of a one-minute interval between the express repudiation becoming effective and the transfer which would, in any event, have operated as a repudiation if nothing had been said, should invest the breach of contract by the employer with some different quality. In each case the effective cause of the dismissal is the transfer of the business, whether it be announced in advance or contemporaneously, or whether it be unannounced, and it would be no misuse of ordinary language in each case to speak of the termination of the contracts of the workforce as having been effected by the transfer. It is absurd to suggest that there is any distinction in substance between any of the hypothetical cases which I have envisaged. Can it, then, one asks, possibly have been the intention of the Secretary of State in framing legislation expressly directed to safeguarding the rights of employees when an undertaking is transferred, to make its effectiveness depend upon whether the transferor, as a result perhaps of a collusive bargain with the transferee, allows a scintilla temporis to elapse between the operation of a notice dismissing his workforce and the completion of the legal formalities of the transfer which is the true cause of their dismissal, particularly having regard to the provisions of regulation 8, which were clearly intended to have the same effect as article 4 of the Directive? My Lords, I should be reluctant so to construe the Regulations, quite apart from any authority. When, however, they are considered in the light of the interpretation placed by the European Court of Justice on the provisions of the Directive, it becomes, I think, clear that your Lordships are not compelled to do so."

75. Turning to Spence, Lord Oliver said (369 F-G):

"… I can detect no flaw in the reasoning by which Balcombe L.J. … reached the conclusion on the facts of that case that regulation 5(1) did not operate to transfer the obligations of the original employer to the transferee."

Spence was a case:

"Where, before the actual transfer takes place, the employment of an employee [was] terminated for a reason unconnected with the transfer…"

and (at page 371G)

"did not involve a dismissal attracting the consequences provided in regulation 8(1)".

76. Having considered decisions of the European Court of Justice and other decisions of courts in this country Lord Oliver concluded that "where an employee is dismissed before and by reason of the transfer the employment is statutorily continued with the transferee ...". (page 372 B)
77. Mr Bowers also relied on Longden and Another v Ferrari Ltd. and Another [1994] ICR 443 (EAT). This case, like Teesside, is a (what is now) section 218(2) case.
78. The facts, in so far as relevant to the matters under consideration, are set out in the headnote:

"In March 1991, the applicant's employers were placed in administrative receivership. On 14 March a potential purchaser contacted the receivers with a view to purchasing part of the company's assets, and on 22 March a preliminary offer was made but no final agreement for the transfer of the employers' undertaking was reached. On 26 March the receivers sent the purchaser a draft contract and on 27 March the purchaser paid a sum on account to enable the company to continue trading for another week while further inquiries and negotiations were conducted. On 28 March the majority of the workforce, including the applicants, was dismissed, and on 10 April a sale of assets agreement was completed between the receivers and the purchaser. On the applicants' complaints of unfair dismissal against the purchaser, an industrial tribunal found that there was a transfer of an undertaking from the employers to the purchaser with the meaning of regulation 3 of the Transfer of Undertakings (Protection of Employment) Regulations 1981, but that the transfer was effected by the agreement for sale on 10 April 1991, nearly two weeks after the applicants' dismissal, rather than by a series of two or more transactions on 26 and 27 March, with the result that the applicants were not employed in the employers' undertaking "immediately before the transfer" as required by regulation 5(3) of the Regulations… ."

79. The headnote summarises the reasons given for dismissing the applicants' appeals:

"… the draft contract of sale, the payment on account and the subsequent negotiations prior to the agreement for sale was merely a succession of events causally linked to one another and not a series of transactions by which a transfer of the employers' undertaking was 'effected;' that the transfer was effected by the single agreement for sale dated 10 April 1991, so that the applicants were not, therefore, employed "immediately before the transfer" within the meaning of regulation 5(3) of the Transfer of Undertakings (Protection of Employment) Regulations 1981… ."

80. Mummery J. referred (at 452) to the submission that this was a case of a single transfer effected by a series of two or more transactions. He then said:

"This appeal tribunal is unable to accept that submission as a correct construction of the regulations. For the purposes of this argument it may be assumed in the applicants' favour that the matters relied on 26 and 27 March 1991 were a series of two transactions. The crucial question is whether the transfer of the undertaking was "effected by a series of two or more transactions." The industrial tribunal was correct in holding that the transfer of Ferrari's undertaking was effected by the agreement of 10 April 1991 and that it was not effected by a series of two or more transactions dating from 26 or 27 March. What happened on 26 March and 27 March and other dates before the agreement of 10 April was a succession of events which can be loosely described as causally linked to one another and to the ultimate conclusion of the receivership sale of assets agreement. It is not, however, sufficient for the purposes of regulation 5(3) that there exists a series of two or more transactions linked in a chain of events. The language of the regulation requires that the transfer of the undertaking is 'effected by' a series of two or more transactions. The transactions of 26 and 27 March did not have that effect. The transfer was not 'effected' by a series of two or more earlier transactions. It was effected by the single agreement of 10 April. This construction is consistent with the decision in Wheeler v Patel [1987] ICR 631, 636G that 'where there is a contract for sale of a business followed some period later by completion of that contract, there is only one transaction.' The transfer took place on completion.

The industrial tribunal was correct in law in holding that the applicants were not employed by Ferrari Ltd. 'immediately before' the transfer of Ferrari's undertaking to Kennedy. In brief, the transfer of Ferrari's undertaking to Kennedy was effected by a single transfer on 10 April 1991, not by a series of two or more transactions. Immediately before 10 April neither of the applicants was in the employment of Ferrari Ltd. They had been dismissed on 28 March."

81. The Tribunal had also held that the applicants could not rely on regulation 8 because the reason for their dismissals was not connected with the transfer, a conclusion upheld on appeal.
82. We turn to Justfern Ltd and Others v Skaife D'Ingerthorpe [1994] ICR 286 (EAT), relied upon by both Mr Bowers and Mr Oudkerk. The case is a (what is now) section 218(2) case. Using the headnote, the facts were:

"In August 1986 the applicant commenced employment with the fourth respondent. On 10 October 1988 he was told that, apparently for financial reasons, the business was closing. He claimed unemployment benefit for a period of just under two weeks from 11 October until 22 October 1988. Some time in mid-October the business was transferred to the employers and on 24 October the applicant was re-engaged. He was dismissed on 6 July 1990. On his complaint of unfair dismissal, an industrial tribunal, when considering whether he had been continuously employed for not less that two years, took into account, pursuant to [what is now section 218 (2)] his previous employment with the fourth respondent and held that they had jurisdiction to hear the complaint."

83. Knox J giving the judgment of the appeal tribunal referred (at 291) to Macer v Abafast Ltd [1990] ICR 234 in which the E.A.T. had held that a gap of 12 days between the end of employment by the transferor of a business and the start of employment by the transferee was not a fatal obstacle to the applicability of what is now section 218 (2). Knox J. cited with approval a passage in the judgment of Wood J. in that case (relied upon by Mr Oudkerk):

"… a court should lean in favour of that interpretation which best gives effect to the preservation of continuity of service and hence to the preservation of rights of the employee, and to obviate and discourage a tactical manoeuvre which seeks to avoid the clear intention of Parliament." (291 G)

84. In the Justfern case, as in this case, there was no suggestion of a deliberate attempt to break the continuity of employment. Knox J. went on to say (at 292 A-B) that the tribunal was not persuaded that the width of interpretation referred to by Wood J. in Macer was "limited to frustration of deliberate avoidance schemes." Knox J. continued (292 B-C):

"Continuity of employment is intrinsically intended to be preserved and, although courts or tribunals may be particularly astute to adopt a construction that frustrates deliberate avoidance schemes, it does not follow from that that a generous construction is inappropriate where no such scheme is present. On the contrary, there can in logic only be one interpretation of a statutory provision and, if a wide construction is appropriate to prevent deliberate avoidance schemes, it nonetheless remains the only appropriate construction when other sequences of events come to be considered."

85. Knox J. then said (292 C-G):

"In the judgment in Macer v Abafast Ltd [1990] ICR 234, 243 Wood J. rejected the argument addressed to that appeal tribunal that the words 'at the time of the transfer' in paragraph 17(2) of Schedule 13 required identification of the particular point of time when the transfer in question took effect. We respectfully agree with that conclusion, which Mr Hossain did not challenge before us. The arguments adduced by Stephenson L.J. in Teesside Times Ltd v Drury [1980] ICR 338, 351 and 352 seem to us very compelling. They are shortly stated, first, that 'the time' of something must take its meaning from what that thing is, and, if the transfer of a trade or business is something which takes time, 'the time of the transfer' more naturally means a period of time than a moment of time.

The second argument was that a liberal interpretation enables a tribunal to consider the de facto, and not the de jure, position, and to find a transfer at the time when the new employer is in actual occupation and control of the old business. The third and most important argument was that the liberal construction accorded with the evident policy of the legislation in preserving continuity of employment. That last consideration has subsequently received powerful support in the House of Lords in Litster v Forth Dry Dock & Engineering Co. Ltd [1989] ICR 341, in relation to the construction of the Transfer of Undertakings (Protection of Employment) Regulations 1981, but it can be supported from internal indications of the Act of 1978 itself such as paragraph 1(3) of Schedule 13 [now section 210(5) of the Act] which reads: 'A person's employment during any period shall, unless the contrary is shown, be presumed to have been continuous.'"

86. A little later in the judgment, Knox J. set out the Tribunal's conclusion (293 E-H):

"We have reached the conclusion that that period of receipt of unemployment benefit did not constitute a gap so wide as to be unbridgeable by paragraph 17(2). Our reasons are as follows. First, the receipt of unemployment benefit is not inconsistent with availability for employment in the trade, business or undertaking in which the employee had lately been employed. There is a major distinction between, on the one hand, applying for and receiving unemployment benefit as a result of wages or salary under an employment ceasing and, on the other, taking on another job. The latter would be far more likely effectively to sever the link between the employee and the trade, business or undertaking by which he had been employed. It is not necessary for us so to hold, because that situation is not before us.

Secondly, once it is accepted that paragraph 17(2) is capable of operating across an interval greater than a week, it follows, in our view, it is capable of bridging a similar period of uncertainty whether or not the employee will be re-employed by a purchaser of the trade, business or undertaking. The receipt of unemployment benefit does no more than create such an uncertainty. It does not eliminate the possibility even on a short term basis of such re-employment."

87. Spence was cited by the Court, but only as supporting the Tribunal's view that section 218(2) disapplies the common law rule that a transfer of a business operates as a repudiation of a contract of employment. Brook Lane Finance was not cited.
88. Mr Bowers referred us to on Rotsart De Hertaing v J Benoidt and IGC Housing Service SA [1997] IRLR 127 (E.C.J.). H was employed as a receptionist by an estate agent. On 19 November 1993 the company changed its name to B and went into liquidation. Its activities were subsequently carried on by a newly formed company I. On 23 November 1993 H was given six months' notice of dismissal by B to run from 1 December. However on 22 December she was dismissed with immediate effect by B on the grounds of serious misconduct. She brought proceedings for damages against both B and I. I contended that it had never been her employer and that it had not dismissed her. The Court held that by virtue of Article 3(1) of the Directive:

"… the contracts of employment and employment relationships existing on the date of the transfer of an undertaking between the transferor and the workers employed in the undertaking transferred are automatically transferred from the transferor to the transferee by the mere fact of the transfer of the undertaking, despite the contrary intention of the transferor or transferee and despite the latter's refusal to fulfil his obligations." (paragraph 21).

89. The Court also held that the transfer of the contracts of employment and employment relationships (and thus the accompanying obligations) takes place on the date of the transfer of the undertaking. The transferor and transferee cannot choose the date from which the contract of employment or employment relationship is transferred. To allow that would be to allow employers to derogate, at least temporarily, from the provisions of the Directive (paragraph 25). The transfer of the contract of employment and employment relationship "necessarily takes place on the date of the transfer of the undertaking and cannot be postponed to another date at the will of the transferor or transferee" (paragraph 26).
90. Clark and Tokeley Ltd v Oakes [1999] ICR 276 (CA) is a (what is now) section 218(2) case. The facts, as set out in the headnote, were:

"The applicant was employed for more than two years in a business before being dismissed on 14 March 1996, together with all the other employees, by a liquidator appointed to safeguard assets during detailed negotiations leading to the transfer of the business to the respondent company. The applicant was asked to remain at his post to maintain continuity and did so. On 21 March 1996 the transfer of the business was completed and the following day the applicant was re-employed by the company on different terms. On 2 April 1996 he was dismissed, and he made a complaint of unfair dismissal to an industrial tribunal. On a preliminary application to decide whether the applicant had been continuously employed for a sufficient period to entitle him to make his claim for unfair dismissal, the tribunal held that he had not been dismissed by the liquidator for a reason connected with the transfer, but that, despite the gap between his employment with the transferor and his employment with the company, the period of his employment with the transferor counted as a period of employment with the company, under [what is now section 218(2) of the Act] and that the tribunal had jurisdiction to hear his claim. An appeal by the company to the Employment Appeal Tribunal was dismissed."

91. The Court of Appeal dismissed the appeal concluding that there was no error of law in the decision of the Industrial Tribunal. Mummery L.J. giving a judgment with which the other members of the Court agreed, said (at page 283 E-F):

"But it does not follow that "the time of transfer" of an undertaking for the purposes of regulation 5 of the Regulations of 1981, which was made to implement the provisions of Directive 77/187, is the same under [what is now section 218(2) of the Act], which originates in legislation dating from 1963, unconnected with the Directive and antedating the introduction of the right not to be unfairly dismissed in 1971: cf. Brook Lane Finance Co. Ltd. v Bradley [1988] ICR 423, 430H, following Secretary of State for Employment v Spence [1986] ICR 651, which was later distinguished by the House of Lords in Litster."

92. Later in his judgment(287F-289H) Mummery L.J. said:

"The particular considerations leading me to the conclusion that this appeal should be dismissed are as follows.

(1) The divergent views of the members of the Court of Appeal in Teesside Times Ltd. v Drury [1980 ICR 338, before whom the point of construction was fully argued by counsel experienced in the field of employment law, indicate that the expression 'at the time of the transfer' in paragraph 17(2) is reasonably capable of more than one meaning. On the one hand, Goff L.J. favoured the narrower construction on which Mr. Prichard relied. … [Mummery L.J. then referred to the passages in the judgment of Goff L.J. set out in paragraph 65 above].

Even though he took the narrower view, he expressly kept open the point that a gap of a day or two might not be fatal where it could be seen that the old employment, the new employment and the transfer of the business are all closely associated: see p. 355 C-D.

(2) On the other hand, Stephenson and Eveleigh L.JJ. took a broader view. Stephenson L.J. hesitantly expressed this view on the expression of 'at the time of the transfer,' at p. 353:

'I can, however, go no further than to indicate my opinion that there is no one stage in the process of transferring a trade or business or undertaking which can be excluded from the time of the transfer by any hard and fast rule, but the question when a trade, business or undertaking is transferred or what is the time of its transfer must be a question of fact and degree to be answered by industrial tribunals in the light of common sense and their knowledge of trade and industry applied to all the circumstances of the particular case.'

...

(4) The expression 'at the time of transfer' in paragraph 17(2) is used in the context of the transfer of a 'trade or business or an undertaking' from one person to another. A trade or business or an undertaking will usually be a going concern of some complexity giving rise to different considerations than a simple transfer of a piece of real or personal property. The trade, business or undertaking may comprise personal and real property, stock-in-trade, incorporeal property, such as goodwill and work in progress, the benefit of existing contracts and the employees themselves. The completion of the transfer of these different elements of the trade, business or undertaking may occur at different times. Such a transfer is more in the nature of a process extending over a period of time than an event timed to take place only at a particular moment in time. Further, as Stephenson L.J. observed in Teesside [1980] ICR 338, 352B, the 'actual state of affairs' rather than 'legal and technical considerations,' for example the execution of documents, are what is known to the employee and make it easier for him to identify the time of transfer.

(5) If paragraph 17(2) were construed in the sense contended for by the transferee, the fortuitous time-tabling or structuring of the manner or machinery of transfer of an undertaking would, if it did not ensure that the employee was still in the transferor's employment at the precise moment of the completion of the formalities of transfer, deprive a long serving employee in the undertaking of employment rights acquired by service in that undertaking. A gap in two employments in the same undertaking, however short in length and whether ineptly, arbitrarily or expertly engineered, would, on a transfer to, and on the continuation of the undertaking by, the new employer, result in the loss of a valuable accrued right not to be unfairly dismissed. The employee would find himself in exactly the same legal position with the new employer-transferee as if he had ceased to be employed in the undertaking altogether and had gone to work for a different employer in a totally unconnected trade, business or undertaking. It is, in my judgment, probable that the purpose of Parliament, in legislating for the computation of a period of continuous employment under paragraph 17(2), was to avoid, not to achieve, this result in the case of an employee employed by the transferee in the same undertaking after the completion of the transfer."

93. Sir Christopher Staughton said that he agreed that the expression "the time of the transfer" may refer to quite a significant period of days or even weeks.

"The whole process of transferring a trade or business or undertaking might take no more than a day; but I doubt if it could ever be confined to a point of time. It refers not to the instant when property is conveyed by one party to the other but the process by which that result is achieved."

He held that what is now section 218(2) should be interpreted in a benevolent or sensible manner and he held "that it refers to a person who is an employee during any part of the time of the transfer."

94. Mr Oudkerk submits that the purpose of the provisions is to safeguard the rights of employees on a transfer. Continuity is "intrinsically intended". A transfer is a complex of operations, part of a continuous process passing through different stages. It would be artificial to put a limit on the length of the transfer process, as the respondent seeks to do. He submits that an appeal court should be slow to interfere with the findings of fact of the Tribunal.
95. At the heart of the submissions of Mr Bowers is, as we have said, his contention that the test for determining when the transfer is complete is that to be found in Teesside (per Stephenson L.J.). When the new employer takes over "actual occupation and control of the old business", the transfer is complete.

The conclusion of the majority (Hooper J. and Mrs D.M. Palmer)

96. Whilst accepting the submissions made by Mr Oudkerk and summarised in paragraph 94, the majority of this Tribunal take the view that Mr Bowers is right. Cases such as Teesside, Tanfern and Clark and Tokeley show that the process of transfer may take time and that gaps of the kind in those cases may be ignored (at least for the purposes of the Act). Nonetheless, the majority takes the view that the "actual occupation and control" test is the right test for determining the time at which a transfer is completed. The majority finds support for this test in the passage in Teesside per Goff L.J. (see paragraph 65 above):

"If the transferee is let into possession and begins to carry on the business for his own account and at his own risk, I would think that that would be the time of transfer."

97. We have set out in some detail the cases relied upon by both parties. In the view of the two members of the Tribunal in the majority, none of those cases contradict the conclusion reached. The "actual occupation and control test" for determining the time at which a transfer is completed is, in the view of the majority, an objective test which should be reasonably easy to apply so as to enable both employees and employers to be able to determine their rights and obligations during a transfer. It also meets the requirements laid down by the E.C.J. in Rotsart de Hertaing (paragraphs 89 and 90 above).
98. The majority find some support for their conclusion in the use in Regulation 3(4) (paragraph 36 above) of the words "to the extent to which the undertaking … was controlled by the transferor and transferee respectively …".
99. The Tribunal did not apply that test. The Tribunal concluded that the transfer was not complete until the whole undertaking (including each secondee) had been transferred. The majority takes the view that this was a wrong approach. If it had applied what the majority believe to be the right test, we have no doubt that it would have concluded that the transfer was probably completed in about September 1990 and certainly long before 1993. It is not necessary therefore to remit the case back for further consideration and this appeal succeeds.

The conclusion of the dissenting member, Lord Davies

100. Lord Davies would have dismissed the appeal for the reasons given by the Tribunal (paragraphs 40 and 41 above). Lord Davies takes the view that the passages in Teesside (paragraph 60 above), Macer and Justfern (paragraphs 84-87 above) fully justify the conclusions reached by the Tribunal.

A further issue

101. Given the conclusion of the majority, it is not necessary to decide a further issue:

"If the transfer took place over the period of time asserted by the Respondent, does a secondee who resigns from the civil service to take up employment with the TEC obtain the benefit of continuity of employment?"

102. Mr Bowers submitted that, in any event, a secondee who resigns from the civil service cannot claim the benefit of continuity of employment.
103. Mr Bowers submits that the words in Regulation 5(1) "any such contract which would otherwise have been terminated by the transfer" operate to exclude the respondents. At common law, a transfer automatically determined a contract of employment. He submitted that the respondents' contracts were not terminated by the transfer but by the resignations. He accepted that if an employee of the undertaking to be transferred is offered a job by the transferor and the employee refuses it, then on transfer, the contract of employment would be automatically determined and that there would be continuity of employment.
104. In paragraph 18 of the reasons, the Tribunal did not accept this argument:

"18. The fifth question we were asked to consider was under Regulation 3 [the Tribunal meant "5"] of the transfer regulations. Would the employers contacts "otherwise have been terminated by reason of transfer?" This is phrase only to be found in the Regulations and may therefore be of little significance if we are right in our conclusion that the TEC is an emanation of the State. However, our reading of that Regulation is that it is merely a reference to the common law position which must have been less than obvious at the time the Regulations came into force. It is well known that the Regulations surprised many lawyers when they first came into force. They achieve a result which is novel against the background of the common law in England and Wales. The common law position is that as stated by Lord Oliver in the case of Lister that the transfer of an undertaking automatically constitutes a repudiatory breach of the employee's contract of employment. The regulations provide that this is not to happen. It is something, in our opinion, that was inserted as an explanatory measure and it achieves little more. Mr Malone contends the words are there and they should be given full effect. We disagree with him on this… ."

105. Mr Bowers also relies on passages in Secretary of State for Employment v Spence and Others, which we have quoted above in paragraphs 68 and 69. 4
106. Mr Oudkerk adopted the reasons of the Tribunal and relies upon the presumption of continuity. He relies particularly on the passage in the judgment of Knox J. in Justfern set out above (paragraph 85).
107. Mr Bowers relies on a passage in Harvey on Industrial Relations and Employment Law (paragraphs 138 and following at F/46). According to paragraph 139, the words pose "an interesting conundrum".

"The heart of the Regulations is reg 5(1): the transfer of the undertaking does not, of itself, terminate the contract, but instead a contract is transferred to the transferee of the undertaking. That applies, on the face of reg 5(1), only to those contracts which would otherwise have come to an end by virtue of the act of transferring the undertaking. The Regulations do not operate if the contract would otherwise have been preserved (eg express novation); nor if the contract is terminated otherwise than by the act of transfer (eg formal dismissal or resignation)." (Paragraph 138) [underling added]

108. As to the words "which would otherwise have been terminated by the transfer" it is noted in Harvey that Article 3(1) "does not contain the extra veneer of words similar to those used in reg 5(1)". In paragraph 140 the authors go on to state:

"Clearly, however, these words will, in appropriate cases, remove employees who are retained either temporarily or permanently by the transferor from the scheme of the Regulations. There would seem to be nothing in principle against the employer making it clear in advance of the transfer of a relevant undertaking to an employee that his or her employment will remain with the transferor (for example because the terms of the contract contain provisions which are sufficiently wide to entitle the transferor to require the employee to work in another part of the business which is not being transferred and the transferor so directs the employee prior to the transfer of the undertaking which is being disposed of). This is sometimes facilitated by the not uncommon practice, in a group of companies, of employing staff in a parent or service company with the consequence that the staff working in the undertaking are not employed by the subsidiary company which is the transferor."

109. As we have said, it is not necessary for us to decide this issue. It is sufficient to say that we would have been inclined to adopt the conclusion of the Tribunal in paragraph 18. This conclusion best achieves the overall purpose of the transfer provisions.

Conclusion

110. By a majority, this appeal succeeds and the decision of the Employment Tribunal is quashed.
111. To avoid the necessity of a further hearing, we have decided to grant permission to appeal to the respondents should they wish to appeal.