Appeal No. UKEAT/0441/10/JOJ

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 6 April 2011

Before
HIS HONOUR JUDGE PETER CLARK
MS V BRANNEY
MR P GAMMON MBE

I LAB FACILITIES LTD	APPELLANT

MISS L METCALFE & OTHERS	RESPONDENTS

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR S CHEETHAM
(of Counsel)
Instructed by:
Messrs Hamlins LLP Solicitors
Roxburghe House
273-287 Regent Street
London
W1B 2AD

 	
For the Respondents	MR J GOLDMAN 
(Solicitor)
Messrs Hendons LLP
2 Mary’s Crescent
London
NW4 4LH	

SUMMARY
TRANSFER OF UNDERTAKINGS - Transfer

PHR – TUPE - whether relevant transfer – no material findings of fact by Employment Tribunal to support findings of relevant transfer under reg 3 (1) (a).  Case remitted to fresh Employment Tribunal upon the appeal being allowed. 

HIS HONOUR JUDGE PETER CLARK 
Introduction
1.	The TUPE question which arises in this appeal is whether the Claimants before the London Central Employment Tribunal, Ms Metcalfe and nine others, were employed in part of the undertaking of a company, I Lab UK Ltd (“UK”), now in liquidation, which was transferred to the Appellant company, I Lab Facilities Ltd (“Facilities”), such that a relevant transfer took place within the meaning of regulation 3(1)(a) of the 2006 regulations.  An Employment Tribunal chaired by Employment Judge Glennie found by its judgment with extended reasons dated 28 June 2010 that a relevant transfer had taken place.  Against that judgment, reached at a pre-hearing review, Facilities now appeals.

Background
2.	We are concerned with two separate economic entities which existed certainly up until the effective date of termination of the Claimants’ contracts of employment on 11 July 2009.  Post-production work and rushes work in the television industry.  The distinction between the two types of operation is conveniently summarised by the Tribunal at paragraph 26 of their reasons in this way:

“Post-production work… involved editing and manipulating filmed footage after filming had finished and producing the complete presentable feature.  This work is to be contrasted with ‘rushes’ work, which involves taking the reels of film available at the end of a day’s shooting, transferring that film onto a videotape via a telecine machine, and then adding the sound in synchronisation with the images.  This is usually done overnight with a view to being produced to the director before beginning the next day’s shooting of the film.  As their name implies, rushes are a hurriedly-produced product intended for ad hoc use and are not of the quality of a final post-production item.” 

3.	The corporate history of these two strands of the business which ultimately came together under the UK umbrella were as follows.  The Claimants were engaged in post-production work, initially with a company called M2 Ltd.  M2 went into administration on 28 April 2008.  Thereafter, the Claimants’ employment was transferred first to Ticketlamp Ltd and later in about June 2008 to RKT Post-Production Ltd.  RKT operated from premises in Frith Street.  Meanwhile, UK operated with different staff in the rushes business from premises in Poland Street.

4.	In April 2009 what is described as a merger took place between UK and RKT.  From that time, the Claimants’ employer was UK as a result of the transfer of their employment from RKT to UK.  Unfortunately, the merger failed.  By June 2009, the merged companies were in serious financial difficulties.  On 12 June the Claimants were warned that redundancies were in contemplation by the general manager of the now-merged companies, Ms Talbot Clark.  On 24 June each Claimant was given a letter signed by Mr John Tadros, there describing himself as general manager and serving notice of termination of their employment to take effect on 11 July.

5.	UK’s liquidator was appointed on 30 July 2009 and on 11 August Facilities, which had been incorporated on 18 February 2009, purchased from the liquidator UK’s plant and machinery for £1,100 and goodwill, the name and client data for £3,900, with a rider to that agreement that the goodwill did not include anything arising from post-production work (reasons, paragraph 40).

6.	Mr Tadros was a significant player in this story.  He became involved in M2 Ltd in 2002 when he invested money in that company.  The Tribunal were not much impressed with his evidence, which they found to be seriously lacking in credibility for the reasons which they give at paragraph 19.  He was a director of Facilities and, the Tribunal found, the central decision-maker when it came to the Claimants’ redundancy at UK, he having signed the redundancy dismissal letters as general manager.

The Tribunal decision
7.	This was a PHR held to determine six preliminary issues identified at paragraph 3 of the reasons.  Those six questions were each answered in the Tribunal’s judgment.  Essentially, for present purposes, the Tribunal found that from 1 June 2008 until April 2009 the Claimants were employed by RKT and from April 2009 to 11 July 2009 by UK following a relevant transfer.  That sequence of events is undisputed.

8.	The issue in the appeal arises from the Tribunal’s further finding (judgment, paragraph 2.3) that on 11 July 2009 the Claimants were dismissed for a reason falling within regulation 7(1) of TUPE with the result that their employment was subsequently transferred from UK to Facilities following a relevant transfer.  Each Claimant was part of that transfer.  Their dismissals were transfer-related within the meaning of regulation 7(1).  A ruling was also given on the period of continuous employment for each individual Claimant.

9.	In arriving at those conclusions the tribunal directed themselves as to the applicable law at paragraphs 5 to 11.  Following a brief reference to regulation 3(1)(a), the Tribunal appear to have concentrated on regulations 4(1) and 7(1) and the learning to be derived from the opinions in the House of Lords in Litster v Forth Dry Dock & Engineering Co Limited (in receivership) [1989] IRLR 161 and the Court of Appeal decision in Dynamex Friction Limited & Ors v Amicus & Ors [2008] IRLR 515.

10.	At paragraphs 44 to 46, the Tribunal considered the rival contentions of the parties as to what was to happen to the post-production work in which the Claimants were engaged following the demise of UK.  It was the Respondent’s case that Facilities would take over only the rushes work performed by UK, not the post-production work formally done by M2 Ltd and RKT (subsequently taken over by UK).  However, the Tribunal concluded (paragraph 45) that the intention primarily in the mind of Mr Tadros was that as much as possible of the pre-existing business should be taken over by Facilities and that would include the post-production work.  They then give reasons for their finding.  As to Mr Tadros’ and through him Facilities’ intentions so far as post-production work was concerned, it was his intention to continue that part of the business of UK if possible.  The purpose or intention behind dismissing the Claimants was to attempt to create a situation whereby post-production work could be taken over by Facilities, leaving behind employees who were not required without any liability to pay them redundancy payments (paragraph 46).  The effect of the Tribunal’s decision, they said, was to thwart that ambition.

11.	On the transfer question, the Tribunal expressed their conclusion at paragraph 51 in this way:

“The Tribunal therefore concluded that there were transfers of an undertaking from M2 Ltd to RKT Post-Production Ltd and then on to I Lab (UK) Ltd affecting the Claimants.  The economic entity was the business of M2 Ltd and of RKT Post-Production Ltd, and subsequently the part of the business of I Lab UK Ltd, that carried out post-production work.” 

The appeal
12.	We return to the real question in this appeal mentioned at the outset of our judgment.  With characteristic economy Mr Cheetham submits that there are no findings of fact by the Tribunal which support the finding that a relevant transfer of the post-production part of UK’s business in which these Claimants were employed (the relevant economic entity) took place within the meaning of regulation 3(1)(a), which provides:

“These regulations apply to -
(a) a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity ...”

13.	Specifically, he submits, there is no finding that the pre-transfer economic entity retained its identity post-putative transfer.  Indeed, there is no finding as to the date of transfer.  Was it 11 July when these Claimants were dismissed or 11 August when Facilities reached agreement with the liquidator of UK or indeed some other date?

14.	In short, Mr Tadros’ intentions for Facilities to take on post-production work, although relevant to the separate question as to whether if there was a relevant transfer the dismissals were transfer-related for the purposes of regulation 7(1) must itself be predicated on the proposition that there is a relevant transfer in the first place.  The absence of any findings of fact to support a finding that there was a relevant transfer, he submits, is fatal to the Tribunal’s conclusions in their PHR judgment.

15.	In response Mr Goldman realistically acknowledges that there are no findings of fact by the Tribunal which address the transfer questions helpfully formulated by Lindsay J (President) in Cheesman & Ors v R Brewer Contracts Limited [2001] IRLR 144.  However, he invites us to take a purposive approach as did the House of Lords in Litster and hold that it is enough that the Tribunal found an intention on the part of Mr Tadros, as the guiding hand behind both UK and Facilities, for the latter to take over as much of the former’s post-production work as was possible.

16.	We are unable to accept that submission.  In Litster there was a relevant transfer and the House of Lords’ approach started from that base.  In the present case we can discern no factual findings by the Tribunal which support the proposition that the earlier economic entity in which the Claimants were engaged retained its identity following the putative transfer.  It follows that this appeal succeeds and is allowed.

Disposal
17.	Plainly, in the absence of relevant findings of fact by the Tribunal, this case must return to the Tribunal for those findings to be made.  We cannot perform that task.  The question now is whether the case returns to the same or a different Employment Tribunal.

18.	Having considered the rival submissions on that question, we are persuaded that the matter should return to a fresh Tribunal.  The earlier Tribunal expressed robust views as to the credibility of Mr Tadros, as they were quite entitled to do.  However, we understand the Appellant’s perception, whether true or not in fact, that on the transfer question the original Tribunal will be predisposed against it when evaluating the evidence which it hears as to events in Facilities after 11 July 2009.

Postscript
19.	We have dealt in this appeal only with the Tribunal’s PHR judgment and the issues considered at that PHR.  Mr Goldman raised during argument a quite separate point as to the consultation provisions in regulation 13 of TUPE which, he submits, apply to the Claimants even if a relevant transfer related only to the rushes operation of UK in which the Claimants were not engaged.

20.	That matter is not before us and we express no views on that submission.  If the Claimants have a claim under regulation 13, it is separate and apart from the preliminary issues considered at the PHR with which we have been concerned.  If the regulation 13 question is to be considered at the remitted hearing before the Employment Tribunal, it will be for the parties or either of them to seek appropriate directions from the Employment Tribunal.