Appeal No. UKEAT/0054/08/LA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 13 November 2008
Judgment handed down on 24 February 2009

Before
HIS HONOUR JUDGE PETER CLARK
MR C EDWARDS
MR B M WARMAN

CLEARSPRINGS MANAGEMENT LTD	APPELLANTS

1) MRS M ANKERS & OTHERS
2) ANGEL SERVICES UK LTD	
3) H ELABY T/A UNITED PROPERTY MANAGEMENT LIMITED
4) PRIORITY PROPERTIES (NW) LTD	
5) HAPPY HOMES UK LTD	RESPONDENTS

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellants	MR MARTYN WEST
(Representative)
Peninsula Business Services Ltd
Litigation Department
Riverside
New Bailey Street
Manchester M3 5PB
	
For the First Respondents
(Mrs M Ankers & Others)	No appearance or representation by or on behalf of the First Respondents
	
For the Second Respondent
(Angel Services Ltd)	MR M GARGAN
(of Counsel)
Instructed by:
Messrs Davies Arnold Cooper Solicitors
6-8 Bouverie Street
London EC4Y 8DD
	
For the Third Respondent
(United Property Management Ltd)
	MISS J WOODWARD
(of Counsel)
Instructed by:
Messrs Halliwells LLP Solicitors
St. James’s Court 
30 Brown Street
Manchester M2 2JF
	
For the Fourth Respondent
(Priority Properties (NW) lTD
	MR I TRUSTCOTT
((One of Her Majesty’s Counsel)
Instructed by:
Messrs Simpson & Marwick Solicitors
4 Carden Terrace
Aberdeen AB10 1US
	
For the Fifth Respondent
(Happy  Homes UK Ltd)	No appearance or representation by or on behalf of the Fifth Respondents	

SUMMARY
TRANSFER OF UNDERTAKINGS
Whether relevant transfer by way of SPC (TUPE 2006, reg 3(1)(b) and (3).  The Employment Tribunal entitled to find that service provided by putative transferor too fragmented to give rise to transfer.

HIS HONOUR JUDGE PETER CLARK
1.	The relevant parties to these proceedings before the Manchester Employment Tribunal were Mrs Ankers and 16 others (the NW Claimants) and (1) Clearsprings Management Limited (Clearsprings) (2) H. Elaby trading as United Property Management Limited (UPM) (3) Priority Properties North West Ltd (Priority) and (4) Angel Services UK Limited (Angel), Respondents.

2.	The issue in this appeal, brought by Clearsprings, is whether an Employment Tribunal chaired by Employment Judge M L Creed, sitting on 18 September - 5 October 2007 erred in law in finding, by a Judgment with reasons extending to 41 pages and promulgated on 30 October 2007, that the contracts of employment of the NW Claimants were not transferred from Clearsprings to UPM and/or Priority.  It is not contended by Clearsprings that any transfer took place to the Fifth Respondent, Happy Homes UK Ltd (Happy Homes), nor to Angel.  The resolution of that issue depends upon the proper construction of Regulation 3(1)(b) and (3) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), which provisions were considered by the Employment Appeal Tribunal (Langstaff J presiding) in two conjoined appeals under the title Kimberley Group Housing Ltd v Hambley [2008] IRLR 682.

Factual Background
3.	In 1999 the National Asylum Seekers Service (NASS) was created in order to discharge the statutory obligation placed on the Secretary of State for Home Affairs to provide accommodation for asylum seekers and their dependants.

4.	On 31 March 2000 NASS awarded national contracts to designated service providers for a 5 year term for the provision of accommodation and support services to asylum seekers, known as Service Users (SUs).  These contracts (the Old Contracts) were awarded on a regional basis.  In North West England the service was provided by four private contractors and a group of public bodies (known as the North West Consortium).  The four private contractors awarded Old Contracts were Clearsprings, Adelphi, Capital and Leena Homes.

5.	As the Old Contracts drew to a close NASS carried out a fresh tendering process with a with a view to entering into further five year contracts known as ‘Target Contracts’.  Since those Target Contracts would not be in place by the date of expiry of the Old Contracts new short term contracts, known as ‘Next Step Contracts’ were entered into with the old service providers, including Clearsprings.

6.	The Old Contracts ended on 9 October 2005 and the Next Steps contracts were fixed until 30 June 2006.  On 8 February 2006 the new Target Contracts were awarded.  Although successful in other parts of the country Clearsprings failed to secure a Target Contract for the North West.  Instead, Target Contracts in the North West were awarded to UPM, Priority and Happy Homes.  As at 8 February 2006 all 17 NW Claimants were employed by Clearsprings.

7.	The new Target Contracts were signed on 9 March 2006 with an ‘effective date’ of 20 March, which marked the start of a transition period during which the new Target Contractors acquired leases of properties to be used to accommodate SUs direct from the landlords (not by way of assignment from Clearsprings or other old contractors) and SUs were gradually taken over by the new Target Contractors.  As the number of SUs accommodated by Clearsprings ran down those SUs were randomly distributed among the new Target Contractors.  Thus the question arose, was there a relevant transfer of the Claimants’ contracts of employment from Clearsprings to Priority and/or UPM, Happy Homes having dropped out of the picture for present purposes?

The Law
8.	The definition of a relevant transfer, now contained in Regulation 3 of the 2006 Regulations, maintains the old definition in Regulation 3(1)(a), not relied on by Mr West in this case, and introduces the new concept, not to be found in the European Directive, of a service provision change (SPC) in Regulation 3(1)(b).

9.	An SPC occurs where, under Regulation 3(1)(b)(ii):
“activities cease to be carried out by a contractor on a client’s behalf … and are carried out instead by another person (‘a subsequent contractor’) on the client’s behalf;
…
and in which the conditions set out in para (3) are satisfied.”

10.	By Regulation 3(3):
“The conditions referred to in paragraph 1(b) are that –
(i)	there is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client;
(ii)	the client intends that the activities will, following the service provision change, be carried out by the transferee other than in connection with a single specific event or task of short-term duration.”

11.	Judge Creed’s Tribunal was referred to a decision of the Newcastle Employment Tribunal in Hambley v Leena Homes Ltd (20 June – 10 July 2007).  That decision was considered by the Employment Appeal Tribunal in Kimberley v Hambley.  The case concerned similar NASS contracts for asylum seekers in the North East, particularly Middlesborough and Stockton.  The Newcastle Tribunal found that there had been a SPC and that whereas the employees and their contracts could not be split the liabilities under those contracts (for redundancy payments, etc) could be apportioned between two transferees (the New Target Contract holders) according to the percentage of the old operation being performed, respectively, by the two incoming contractors who replaced the outgoing contractor in those two ‘cluster’ areas, Leena Homes.  

12.	Judge Creed’s Tribunal declined to follow that approach, a view subsequently endorsed by Langstaff J’s division in this appeal tribunal.  The Employment Appeal Tribunal held that under TUPE 2006 one transferor could transfer the provision of a service to more than one transferee.  However, there may be some circumstances in which a service which is being provided by one contractor to a client is in the event so fragmented that nothing which one can properly determine as being an SPC has taken place.  The Employment Tribunal must look at all the facts in the round.  It may be that any difficulties in determining who should take responsibility for an employee’s contract after any given date may be taken into account by a tribunal as indicating there is no SPC.  On the facts of that case the Employment Tribunal was entitled to conclude that there was an SPC, and the Employment Appeal Tribunal went on to hold that, rather than apportion the liabilities, the Employment Tribunal ought to have found that all liabilities were transferred to a single new contractor, Kimberley.

The Employment Tribunal decision
13.	Without the benefit of the Employment Appeal Tribunal judgment in Kimberley v Hambley Judge Creed’s Tribunal concluded:

(1)	There was an activity which constituted a SPC, namely the provision of accommodation and pastoral care to asylum seekers allocated by NASS in the North West, notwithstanding that the SUs would change from time to time, as would the occupied properties and degree of pastoral care required (paragraph 47).

(2)	Where no single transferee could be identified as having taken over the activity the Regulations could not be said to operate (paragraph 57).

(3)	They did not feel able to identify a potential transfer date, save that it fell on a day between 31 May and 30 June 2006 (after the 2006 Regulations came into force on 6 April 2006).  The difficulty in identifying a fixed date indicated that the ‘activity’ had become so fragmented as to be outside the scope of the regulations (paragraph 74).

(4)	On the question of fragmentation the Employment Tribunal found (paras. 86-87) that the SUs for which each of the NW Claimants were responsible transferred after February 2006 to two, or all three of the putative transferees, (a destination table appears at paragraph 52 of their Reasons) and that the present case was distinguishable on its facts from that considered by the Court of Appeal in Fairhurst Ward Abbotts Ltd v Botes Building Limited [2004] ICR 919, a case concerned with the old transfer provisions.

(5)	The Tribunal further accepted the argument advanced on behalf of the putative transferees that none of the NW Claimants fell into an organised grouping of resources or employees that were the subject of any relevant transfer so that no division exercise could be performed.  None of these Claimants were dedicated to that part of any service which transferred to the relevant new service provider as their roles involved delivering a service to asylum seekers (SUs) who were transferring to other new service providers.  The Claimants were further dealing with properties which were transferring to other new service providers or being retained by Clearsprings and being utilised for other purposes (paragraph 100).

The Appeal
14.	The Notice of Appeal, lodged on 11 December 2007, was drafted without the benefit of the Employment Appeal Tribunal judgment in Kimberley v Hambley (25 April 2008).  It was there contended, among other things, that ‘fragmentation’ was not a relevant consideration.  Further, it was submitted that the fact that no single transferor (sic) took over is neither relevant nor decisive.

15.	Having considered the judgment delivered by Langstaff J in Hambley, Mr West places at the forefront of his submissions the proposition, endorsed by Langstaff J in Hambley (paragraph 33) that a relevant transfer of an SPC may take place where there is more than one transferee.  Judge Creed’s Tribunal was wrong to find otherwise (Reasons, paragraph 57).

16.	Assuming that submission to be correct, following Hambley, we are not persuaded that the Creed Tribunal limited its reasoning to that simple proposition.  Again, following Hambley, that leaves the separate question of ‘fragmentation’ (Hambley, paragraph 35). 

17.	It is at this point that the particular facts of the case become important.  Before considering the facts here it is instructive to consider the factual matrix in other decided cases.  First, Hambley.  There the finding was that 71 per cent of the activities performed in Middlesborough were performed by one putative transferee, Kimberley, and the remaining 29 per cent by Angel, the other putative transferee.  On the basis of that finding the Employment Appeal Tribunal concluded that the relevant employees of Leena Homes transferred to Kimberley.  The position was even clearer at Stockton, 97 per cent of the operation went over to Kimberley and only 3 per cent to Angel.  The relevant employees carrying out Leena’s activity at Stockton transferred to Kimberley.  To take another example from the pre-2006 law, in Duncan Web Offset (Maidstone) Ltd v Cooper [1995] IRLR 633 (EAT, Morison P) about 80 per  cent of the Claimant’s employees’ time was devoted to that part of the business of Passmore Web Offset which was transferred to Duncan Web Offset.  A relevant transfer of their contracts of employment took place.  Thirdly, in Fairhurst Ward, to which the Creed Tribunal referred (paragraph 87), the maintenance of void housing stock throughout the area of a local authority was initially let to a single contractor and then, on re‑tendering, to two separate and different contractors.  The Court of Appeal held that each particular part transferred was identifiable as a separate economic entity such that a relevant transfer took place.  What was one geographical area was partitioned into two.  Each part of the undertaking was separately transferred to the respective incoming contractors.  We note that in the Employment Appeal Tribunal Judge Burke QC, at paragraph 42 of his judgment, set out at paragraph 19 of the judgment of Mummery LJ in the Court of Appeal, observed that “circumstances may be envisaged where the degree of fragmentation might be such that what emerged was not recognisably the same entity when viewed as a whole, so that no relevant transfer could take place”.  That was not the position on the facts of that case as the Employment Tribunal found.  Both the Employment Appeal Tribunal and the Court of Appeal declined to interfere with that conclusion.

18.	Against that background we return to the Creed Tribunal’s findings in the present case.  The activity carried out by Clearsprings was the provision of accommodation and pastoral care to asylum seekers allocated by NASS in the North West (Reasons, para 47).  As at the earliest possible transfer date, 31 May 2006 (paragraph 74), 425 SUs had already been taken on, during the transition period, by Priority, leaving only 62 with Clearsprings and 175 by UPM, leaving 154 with Clearsprings (paragraph 27 (51)).  The allocation of SUs to individual Claimants (paragraph 27 (52)) showed no discernible pattern of re-allocation to the incoming contractors.  In short, we accept the submissions developed by Mr Truscott QC, Mr Gargan and Miss Woodward that on their findings of primary fact this Employment Tribunal was entitled to conclude that the activity carried on by Clearsprings was so fragmented that no relevant transfer took place, applying Regulation 3(1)(b) read with Regulation 3(3).

19.	Consequently this appeal fails and is dismissed.