Appeal No. UKEAT/0133/15/BA

EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8AE

	At the Tribunal
	On 19 November 2015
	Judgment handed down on 26 November 2015

Before
HIS HONOUR JUDGE SHANKS
(SITTING ALONE)

ICTS UK LIMITED	APPELLANT

MR M MAHDI & OTHERS	RESPONDENTS

Transcript of Proceedings

JUDGMENT

APPEARANCES

For the Appellant:	MR STUART MORLEY
(Representative)
Moorepay Compliance Ltd
Warwick House
Hollins Brook Way
Pilsworth
Bury
Lancashire
BL9 8RR

For the Respondents:		
For Mr U Masood and Mr C Law	MR NATHANIEL CAIDEN
(of Counsel)
Instructed by:
Vanderpump & Sykes LLP
Lough Point
2 Gladbeck Way
Enfield
Middlesex
EN2 7JA

For Mr M Mahdi, Mr I K Musoke, Mr M Y Sugal,
Mrs E Gyamfi-Kumaning, Mr H Moallim and
Mr A Hergouma

	The Respondents in Person	
For Mr B P Gomez and Mr A Kourtoukov

	No appearance or representation by or on behalf of the Respondents

For First Call Secure Group Limited
	Respondent debarred from taking part in this appeal

SUMMARY
TRANSFER OF UNDERTAKINGS - Transfer
PRACTICE AND PROCEDURE - Admissibility of evidence

In the context of a putative TUPE transfer which was a “service provision change” the Employment Judge had to decide on the intention of the “client” in relation to the condition set out in Regulation 3(3)(a)(ii).

In doing so he expressly declined to make any findings about or take into account events subsequent to the service provision change which were potentially relevant circumstances in considering what inference to draw as to the client’s intention at the time of the change.  That was an error of law which may have affected the result.

Appeal allowed and the matter remitted to the Employment Judge to make appropriate findings of primary fact on subsequent events and to reconsider his conclusion on the client’s intention in the light of further submissions. 

HIS HONOUR JUDGE SHANKS

Introduction
1.	The ten Claimants in this case were employees of the Appellant, ICTS UK Ltd, who worked as security guards at a former Middlesex University site called Trent Park Campus where ICTS had a contract to provide security services.  They all lost their jobs on 11 November 2013 when a new company (First Call Secure Group Ltd) took over security at the site.  There was a dispute between ICTS and First Call as to whether there was on that date a relevant transfer under the TUPE Regulations so the Claimants were forced to bring their claims against both ICTS and First Call.  

2.	In a Judgment dated 15 September 2014 Employment Judge Southam sitting in Watford decided, following a three day Preliminary Hearing on 26-28 August 2014, that there was no relevant transfer and that only ICTS could be liable.  ICTS appealed against that decision and on the sift Judge Richardson allowed three grounds of appeal to proceed to a Full Hearing.
 
3.	It should be noted at the outset that, although they were Respondents to the claims and to ICTS’s appeal, First Call did not appear at the Employment Tribunal or the EAT.  Shortly before the Preliminary Hearing they wrote to the Employment Tribunal to say that they were unable to “attend to give evidence or provide representation due to severe financial difficulty” but they maintained their position that there had been no TUPE transfer and relied on written representations.  In the EAT they were debarred from taking part in the appeal because they failed to file an Answer to the Notice of Appeal.  Nevertheless, so far as those who did appear before the EAT were aware, First Call are still in existence and still providing security services at the Trent Park Campus site.

4.	The Claimants are in the unfortunate position of having received no compensation so far (although they are undoubtedly entitled to some) because of a dispute in which they are not directly involved.  On this appeal for obvious reasons they have sought to uphold the Employment Judge’s decision with the assistance of Mr Caiden, who represented two of them before me as he did below, and whose submissions the others effectively adopted.  Mr Morley who appeared for ICTS also represented them below.

Factual background
5.	ICTS had a contract with Middlesex University to provide security at the Trent Park Campus site well before the events in question.  In 2012 the University closed the campus and it became a vacant site from the end of the summer term of that year.  ICTS continued to provide security at the now vacant but valuable site.  The Employment Judge made detailed findings about the nature of the security services provided during that period at paragraphs 14.3 to 14.6 of his Judgment which I need not recite here.

6.	In July 2013 the site was purchased by a Malaysian organisation called AUCMS.  ICTS continued to provide security at the site as before and produced a draft contract for the new owners to sign setting out the services they were providing.  On 12 September 2013 a representative of AUCMS told ICTS that the contract for the services they were providing would be going out to tender and, in response to a question about ICTS’s rates, she was informed that they would be as appeared in the draft contract.  There was no evidence of any tender process actually taking place but on 16 October 2013 ICTS were informed that AUCMS would be appointing a new security company shortly and they were told to prepare for handover at mid-day on 11 November 2013.

7.	An issue arose between ICTS and the AUCMS representative as to whether this would involve a TUPE transfer but it was not resolved.  At 09.32 on 11 November 2013 an email was sent from First Call to ICTS with a letter dated Friday 8 November.  The letter stated that “AUMCS [sic] (the new owners of Trent Park Campus) has contracted with us to provide security services at the … site”.  It went on to refer to the TUPE issue and to say this:
“… it is important we set out our understanding of [TUPE] in direct relation to your claims and what legal foundation our objections are based on.  In doing so, we have to go back several months:
1. The campus was formerly owned by Middlesex University and we are told that you provided security at the campus for some years with Middlesex University as your client.
2. The campus was sold to AUMCS [sic] earlier this year and at that time two things changed: the client changed and the activities which you had previously been providing at Middlesex either ceased or substantially changed.
3. In any case AUMCS did not enter into a new fixed term contract with you, they were expecting the building contractors to commence work within a few weeks and knew that they would be providing their own security.  Accordingly AUMCS merely asked you to provide limited security at the campus for short-term duration.
The legal position in respect of the above events is that the change of ownership of the campus, and hitherto the client, defeats TUPE … Your contract with Middlesex was not novated to AUMCS and you appear to agree with that proposition because you presented a fresh contract to AUMCS (which in the event they chose not to pursue).  The short-term duration (ie pending arrival of a building contractor and/or re-opening of the campus) brings your present activities outside the scope of TUPE by virtue of r.3(3)(a)(ii).  In other words your company has merely been providing a “caretaker role” pending the implementation of a permanent solution …
Taking all the above into consideration we are of the view that there is no service provision change within the relevant definitions of TUPE and that your employees are not entitled to transfer to us …”

As will be seen, those arguments were, strictly speaking, irrelevant to the TUPE issue, focussing as they did on AUCMS’s intentions in relation to ICTS when they acquired the site in July 2013 rather than their intentions in November 2013, when ICTS ceased to provide security, in relation to the task to be undertaken by First Call.
 
8.	As I have said the Claimants lost their jobs on 11 November 2013 and in due course they brought claims against both ICTS and First Call.  First Call submitted a Response some time before 2 July 2014 which stated (1) that AUCMS planned to redevelop the site with a multi-million pound construction and renovation scheme, (2) that the contract which went to tender was not to provide security for an operating university campus (as had been the case with ICTS’s original contract with Middlesex University) but to secure what was to become a building site (which entails completely different security requirements), (3) that they (First Call) had entered into a contract dated 21 October 2013 with a company called Castlefields Global Ltd who were contracted to manage the refurbishment, and (4) that the contract was to provide security services for a three month period and thereafter until completion of the refurbishment.  

9.	On 14 August 2014, shortly before the Preliminary Hearing, First Call produced by way of disclosure a copy of the contract dated 21 October 2013 which they had sought to rely on in the Response.  Following a careful analysis of the evidence the Employment Judge concluded that this was not a genuine contract.  As I have recorded First Call did not attend the hearing or present any evidence from AUCMS or anyone else although the Employment Judge was clearly of the view that they would have been able to assist and he was sceptical as to their reasons for non-attendance.  

10.	There was uncontested evidence before the Tribunal from ICTS that as at the date of the hearing no planning permission had been granted for any significant building at the site and none had taken place.  The Employment Judge did not record or make any finding in relation to this evidence. 

Legal context
11.	The relevant provisions of TUPE were these:
“3. A relevant transfer
(1) These Regulations apply to -
…
(b) a service provision change, that is a situation in which -
…
(ii) activities cease to be carried out by a contractor on a client’s behalf … and are carried out instead by another person … on the client’s behalf
…
and in which the conditions set out in paragraph (3) are satisfied.
…
(3) The conditions … are that -
(a) immediately before the service provision change -
…
(ii) the client intends that the activities will, following the service provision change, be carried out by the transferee otherwise than in connection with a … task of short-term duration …”

12.	The Employment Judge concluded that the activities carried on by ICTS and First Call at the site before and after 11 November 2013 respectively were substantially the same and that the client remained the same (AUCMS).  There is no challenge to those conclusions.  In those circumstances it was clear that TUPE applied unless the condition at Regulation 3(3)(a)(ii) was not satisfied, i.e. unless AUCMS intended on 11 November 2013 that after that date the “activities” would be carried out by First Call “in connection with a … task of short-term duration.”  On the authorities I have been shown it is clear that (1) the relevant intention was that of AUCMS as at 11 November 2013; (2) the relevant intention must relate to the “task” to be carried out and its intended duration rather than to “the activities”; (3) an “intention” is more than a “hope and wish”; and (4) the question of what the relevant intention was is one of fact for the Tribunal.  

13.	In deciding such a question of fact it is almost invariably necessary for an Employment Tribunal (like any other Tribunal) to draw an inference from all the relevant surrounding circumstances presented to it.  Such circumstances can obviously include contemporaneous expressions of intent and actions by the relevant party or its agents; but they can also include what the party says or does not say after the relevant event, in particular in response to the forensic process; and in my judgment there is no reason why they cannot also include subsequent events (or non-events), provided of course that those events are capable of casting light on the intention of the relevant party at the relevant date, and that the fact-finder bears in mind that the ultimate issue to be decided is intention and not outcome.  As Judge Richardson observes in his sift reasons, juries asked to make findings about a party’s intentions in criminal trials are directed along these lines all the time. 

The Employment Judge’s finding on intention
14.	The Employment Judge dealt with the question of AUCMS’s intention at paragraphs 25 to 30 of the Judgment, in particular at paragraph 27.  Having considered a submission about the burden of proof, he stated that his task was to determine (if he could) what was the intention of the client in relation to security services immediately after 11 November 2013.  He then stated at the beginning of paragraph 27:
“27. It is also clear that I must determine the intention as at 11 November 2013 and I cannot look back at previous events that have occurred since then up to the date of the hearing.  I made no findings in relation to what happened subsequently for that reason. …”

15.	The Judge’s reasoning in the remainder of paragraph 27 and in paragraph 28 is unfortunately not entirely clear.  He first said that he had no doubt that AUCMS “engaged [ICTS] to undertake a task of short-term duration”, a question which he acknowledged was not the (central) one he had to decide but which he said was relevant; it seems that he made this finding on the basis that AUCMS had an urgent need to secure the site once they took ownership on 11 July 2013.  He then classified the “task” which he needed to consider for the purposes of Regulation 3(3)(a)(ii) as being to provide security for an unoccupied site in order to retain valuable buildings in good condition, without being vandalised or otherwise damaged by intruders.  He then said this:
“27. … I have no reason not to accept the contents of [First Call’s] letter of 8 November 2013, which explicitly indicated that there would either be the arrival of building contractors or the re-opening of the campus [though no] indication was given as to the time that that would take. …”

He said that the phrase used by First Call about ICTS’s activities in the letter (he does not expressly say which phrase) applied equally to what First Call were to do.  He said it was logical to infer on the basis of commercial sense that the intention of AUCMS was that the campus would only remain unoccupied for a limited period of time, probably no more than a year, there being no hint of evidence that the site would be retained as an investment.  The security of an unoccupied site was therefore “a short-term operation”.  He said that his own expectation was that refurbishment would take possibly up to a year, but he acknowledged there was no evidence to that effect, though he said he would still regard that as a short-term task.  In paragraph 28 he considered whether this might be a case where there was only “a hope and a wish” and concluded that it was clear on the evidence that “AUCMS had an intention either to redevelop the site or to re-open the campus”.

16.	On that basis, he found that the condition in Regulation 3(3)(a)(ii) was not satisfied and TUPE did not apply to the putative transfer with the consequence that the Claimants’ contracts of employment and claims did not transfer to First Call but remained with ICTS. 

The first ground of appeal
17.	The first ground of appeal is in effect that the Employment Judge was wrong to wholly ignore events occurring after 11 November 2013, as he says he is doing in the opening sentence of paragraph 27 of the Judgment.  In short, ICTS say that he should have made findings based on the unchallenged evidence from ICTS that at the time of the hearing no planning permission had been obtained and no building work had started at the site and should have considered these facts as part of all the circumstances when determining AUCMS’s intention on 11 November 2013. 

18.	First Call say first in response that there was no error of law in the way the Judge directed himself and that he was simply correctly reminding himself that the relevant question was the AUCMS’s intention at the relevant time and not what happened thereafter.  But, as I have indicated in paragraph 13 above, subsequent events can be relevant in deciding someone’s intention and, in my judgment, it would indeed be an error of law entirely to ignore such events and to fail to make findings of fact about them if they were potentially relevant.  I do not read Judge Eady QC’s decision in Horizon v Ndeze (EAT 19.5.14) at paragraph 52 to be suggesting otherwise: it is clear from all the facts of that case that the Employment Tribunal may well there have approached the evidence about what was going on at the time of the hearing wrongly; if she was suggesting that it can never be permissible to take into account in an appropriate way such evidence then I would respectfully disagree.

19.	First Call’s second response is to say that in fact the Employment Judge did consider facts occurring after 11 November 2013 and reference is made to paragraphs 14.28 to 14.30 of the Judgment where the Judge deals with letters from First Call and their solicitors to Claimants which were sent between 11 November 2013 and the hearing.  That does not seem to me to be any answer to the point: the Judge expressly stated that he was not making findings of fact in relation to subsequent events and he did not make (or at any rate record) any findings about planning permission or building works or consider the possible relevance of those matters.

20.	First Call’s third answer is that this omission had no effect on the outcome and that this ground of appeal must therefore be dismissed in any event.  Mr Caiden says that the key reasoning of the Judge was that there was no reason why a new owner would want to keep a site unoccupied for more than the short-term and therefore the intention must have been that the task of guarding an unoccupied site would be short-term.  The fact (if established) that nothing had happened in relation to developing the site nine months later could have had no impact on this reasoning.  I confess I have wavered over this point.  

21.	I agree that, once the Judge had classified the “task” as that of guarding an unoccupied site, the straightforward reasoning as Mr Caiden has set it out would be very unlikely to be affected by any consideration of what in fact happened after the event.  However, the Judge’s reasoning in paragraphs 27 and 28 is, as I have indicated, not as clear as it might have been and for whatever reason he undoubtedly relies to some extent on the contents of the letter of 8 November 2013.  It seems to me inescapable that findings that no planning permission had been obtained and no building work carried out as at August 2014 (if they had been made) may have impacted on the Judge’s decision by (a) casting (further) doubt on the reliability of what was said in the letter of 8 November 2013 and (b) raising questions as to whether it could genuinely have been intended that the “task” would be “of short-term duration” and as to whether that could have been more than a “hope and wish.”  

22.	In those circumstances I have come to the view that the Judge’s failure to make findings about and take into consideration events after November 2013 was an error of law and that it may have made a difference to the result.  In those circumstances I must allow the appeal on this ground and remit the matter to the Employment Tribunal to reconsider its decision on Regulation 3(3)(a)(ii).  

The second ground of appeal
23.	The second ground of appeal is that the Judge misapplied the burden of proof in relation to Regulation 3(3)(a)(ii).  This submission is based on a statement of Slade J in Robert Sage Ltd v O’Connell [2014] IRLR 428 at paragraph 42 to the effect that the Regulation creates an exception and it is for the party relying upon it “to establish that the exception applied”.  Mr Morley says in effect that since First Call called no evidence at all and the purported agreement on which they relied was found to be bogus they could not have satisfied the burden on them to establish the exception.   

24.	In paragraph 25 of the Judgment the Employment Judge said that Mr Morley was wrong to suggest that it was for First Call to “adduce evidence of the client’s intention” and in paragraph 26 he said in effect that although First Call had called no evidence they had made written submissions on the point and that his task was to “determine if I can what was the intention of the client in relation to security services immediately after 11 November 2013” (my emphases).  Mr Caiden says that the Judge adopted the right approach; he referred me to a passage in the judgment of May LJ in Morris v London Iron & Steel Company [1987] ICR 855 at page 864 where the point is made that a Judge presented with an issue of fact must do his best to make a finding by drawing inferences if necessary and that only if he is unable to reach any view is it appropriate to fall back on the concept of the burden of proof.  

25.	I accept Mr Caiden’s submission as to how the burden of proof should operate in a case like this.  The Judge was entitled to consider the issue raised before him as to AUCMS’s intention and to reach a view on the basis of inference regardless of what evidence First Call did or did not call.  That conclusion is not inconsistent with Slade J’s statement in Robert Sage and avoids the potential unfairness for claimants of being prejudiced by a situation where a putative transferee cannot or will not bring relevant evidence to the Tribunal.

The third ground of appeal
26.	The third ground is that the Employment Judge was perverse in stating at paragraph 27 of the Judgment that he had “no reason not to accept the contents of the … letter of 8 November 2013” and was therefore perverse in his decision on the main issue.  ICTS say that, because the letter emanated from a party who had deliberately failed to appear or provide evidence although they could undoubtedly have assisted and because the Judge had found in effect that they had produced and relied on a bogus agreement, it was perverse to say he had no reason not to accept the contents of the letter and to reach conclusions based on it.

27.	Mr Caiden rightly points out that just because a Tribunal rejects one document put forward by a party does not mean that every document must be rejected.  He also makes the point that the Employment Judge based his decision not only on the letter but also on the commercial context.  

28.	I accept that it is somewhat surprising that the Tribunal Judge should have chosen to accept the contents of the letter of 8 November 2013 without any critical analysis of the reliability (or indeed the significance) of what it was saying.  However, I do not think that it can be described as perverse, in the sense of obviously wrong, to have decided to accept the contents as being true and take them into account as part of the overall circumstances when considering AUCMS’s intention.  Furthermore, the ultimate decision about the intention of AUCMS, which is what matters, cannot I think conceivably be described as “perverse” even though it was, as I have found, based in part on an erroneous decision to exclude certain facts from consideration.

29.	I therefore reject the third ground of appeal.  However, I should say that since I have allowed the first ground of appeal and will remit the matter to the Employment Tribunal the parties will in my view be able to re-open any arguments about the significance of the letter of 8 November 2013 before the Employment Tribunal notwithstanding that I have rejected the third ground of appeal.

Disposal
30.	Given my decision on the first ground the matter will, as I have said, have to be remitted to the Employment Tribunal.  I heard no submissions on the point but at the moment I can see no reason why it should not be remitted to Employment Judge Southam; if any party disagrees with that view they can make written submissions to me within seven days of the sealing of the Order which will be drawn up after this Judgment is handed down.  It is also my view that a further hearing should be held but that no further evidence should be adduced and the Employment Judge should be invited to make findings of primary fact as to what happened after November 2013 based on the evidence presented in August 2014 and to reconsider his conclusions on Regulation 3(3)(a)(ii) in the light of any further submissions (including, I imagine, from First Call if they are not debarred and choose to appear). 

31.	I realise this decision will represent a severe disappointment for the Claimants who are entirely blameless in all this and for whom I have great sympathy but, as I indicated at the hearing, I am afraid I cannot allow that consideration to influence my decision and must decide the case according to the law as I see it.