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You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Kimberley Group Housing Ltd v. Hambley & Ors (UK) Ltd [2008] UKEAT 0488_07_2504 (25 April 2008)
URL: http://www.bailii.org/uk/cases/UKEAT/2008/0488_07_2504.html
Cite as: [2008] ICR 1030, [2008] UKEAT 0488_07_2504, [2008] IRLR 682

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BAILII case number: [2008] UKEAT 0488_07_2504
UKEAT/0489/07/RN
Appeal No. UKEAT/0488/07

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
             At the Tribunal
             On 24 & 25 April 2008

Before

THE HONOURABLE MR JUSTICE LANGSTAFF

MR D EVANS CBE

MR T MOTTURE



UKEAT/0488/07/RN

KIMBERLEY GROUP HOUSING LTD
APPELLANT

(1) MR D HAMBLEY AND OTHERS
(2) LEENA HOMES LTD
(3) ANGEL SERVICES (UK) LTD


RESPONDENTS


UKEAT/0489/07/RN

ANGEL SERVICES (UK) LTD
APPELLANT

(1) MR D HAMBLEY AND OTHERS
(2) KIMBERLEY GROUP HOUSING LTD
(3) LEENA HOMES LTD


RESPONDENTS


Transcript of Proceedings

JUDGMENT

JUDGMENT

© Copyright 2008


    APPEARANCES

     

    UKEAT/0488/07/RN
    For the Appellant

    MR W JOSLING
    (of Counsel)
    Instructed by:
    Messrs Haldanes Solicitors
    66 High Street
    Stevenage SG1 3EA

    For Mr D Palmer








    For the First Respondent








    For the Second Respondent







    For the Third Respondent
    MR A ALLEN
    (of Counsel)
    Instructed by:
    Messrs Rowley Ashworth Solicitors
    Suite 1B
    Joseph's Well
    Hanover Walk
    Leeds LS3 1AB

    MR E LEGARD
    (of Counsel)
    Instructed by:
    Messrs Newbys with Thomas, Bingham & Spark Solicitors
    100 Borough Road
    Middlesbrough
    Cleveland TS1 2HJ

    MR M PALMER
    (of Counsel)
    Instructed by:
    Messrs Walker Morris Solicitors
    Kings Court
    12 King Street
    Leeds LS1 2HL

    MR M GARGAN
    (of Counsel)
    Instructed by:
    Messrs Davies Arnold Cooper Solicitors
    6-8 Bouverie Street
    London
    EC4Y 8DD

    UKEAT/0489/07/RN
    For the Appellant

    MR M GARGAN
    (of Counsel)
    Instructed by:
    Messrs Davies Arnold Cooper Solicitors
    6-8 Bouverie Street
    London EC4Y 8DD
    For Mr D Palmer








    For the First Respondent








    For the Second Respondent





    For the Third Respondent
    MR A ALLEN
    (of Counsel)
    Instructed by:
    Messrs Rowley Ashworth Solicitors
    Suite 1B
    Joseph's Well
    Hanover Walk
    Leeds LS3 1AB

    MR E LEGARD
    (of Counsel)
    Instructed by:
    Messrs Newbys with Thomas, Bingham & Spark Solicitors
    100 Borough Road
    Middlesbrough
    Cleveland TS1 2HJ

    MR W JOSLING
    Messrs Haldanes Solicitors
    Wye Lodge 66 High Street
    Old Stevenage
    Herts SG1 3EA

    MR M PALMER
    (of Counsel)
    Instructed by:
    Messrs Walker Morris Solicitors
    Kings Court
    12 King Street
    Leeds LS1 2HL


     

    SUMMARY

    TRANSFER OF UNDERTAKINGS

    The principles and approach which a Tribunal should take where there has been a transfer of one service provider's activities to two or more transferees, and there is disagreement as to whether an employee's contract is now to be with the transferor or any of the transferees, considered. The Tribunal had decided that where employees were dismissed, it was permissible to decide that the rights and obligations under this contract should be apportioned on a percentage basis between transferees. This was held an error. The Tribunal should have applied the approach in Botzen, adopted where there was a transfer of an undertaking under the 1981 Regulations, to a change of service provider under the 2006 Regulations.


     

    THE HONOURABLE MR JUSTICE LANGSTAFF

  1. This appeal relates to the application of the Transfer of Undertakings Protection of Employment Regulations 2006 ("TUPE"). It raises the question how an Employment Tribunal should approach the situation in which a service has been provided by one contractor and is henceforth to be provided by two or more contractors in succession to the first. Which of those two, if any, should take responsibility for any employee who had been engaged in performing the service previously and on what principled basis? We are told that this is the first appellate consideration of this particular issue.
  2. The Employment Tribunal at Thornaby from whose decision at a pre-hearing review of 25 July 2007 this is an appeal were faced with just such a problem.
  3. The facts

  4. In a 32 page decision few facts were found. Most of the primary facts apparently are undisputed. Although it may be that other facts were not found which it might have been helpful on appeal to know of, and it may be that some facts were not explored as we might have hoped, the focus of the Tribunal's decision was more upon the discussion of broad principle applicable to this situation than it was to the facts.
  5. Leena provided accommodation and related services for asylum seekers pending determination of their applications for asylum. That was by agreement with the Home Office. Leena did so in Teesside under a contract issued in 2000 for a period of 5 years which was extended for a further year. It provided about 140 properties in Middlesbrough and approximately 50 properties in Stockton to accommodate a fluctuating number of asylum seekers.
  6. In 2006 Leena lost the contract. Kimberley, the First Appellant, and Angel, the Second Appellant, were awarded the right to succeed Leena under a new contract. They did not accept that TUPE applied, whether the 1981 Regulations or the 2006 Regulations which superseded the 1981 Regulations with effect from 6 April 2006. As a result employees of Leena who had been engaged in the service of providing accommodation and related services for asylum seekers lost their jobs. Six of them, by no means all the relevant workforce as we have discovered during the course of this hearing, brought claims before the Employment Tribunal. Three were from the Middlesbrough office and three from the Stockton office, Leena having had one office in each location. Mr Bibby was an inspector, Mr Miller a maintenance supervisor and Mr Hambley a maintenance operative in Middlesbrough. Their counterparts in Stockton were Mr Holden, Mr Close and Mr Palmer. Before us all the employees except Mr Palmer are represented by Mr Legard. Mr Palmer is separately represented by Mr Allen. In addition to those six, whose function was entirely related to the inspection of properties with a view to satisfying the obligation which rested upon Leena for external repair and ensuring that any necessary repair was carried out, there were in each office a welfare officer and administrative staff. In total, we have been told, taken across both Stockton and Middlesbrough, there were 18 staff of whom 13 were engaged in building maintenance, 2 were welfare officers and the remainder, split 3 and 2, were administrative staff.
  7. When the contracts to succeed Leena were awarded the contracts themselves provided that they would begin on 20 March 2006. That date is prior to 6 April 2006. Accordingly that date was prior to the coming into force of the 2006 Regulations (as we shall call them). However, it was provided that there would be a transition period, in effect, in which progressively Kimberley and Angel would provide services for an increasing number of asylum seekers in each location and correspondingly Leena would provide for less.
  8. The Tribunal treated Middlesbrough and Stockton as two separate organisations and in effect two separate contracts; see paras 4.49 and 4.2 of its decision.
  9. The 2006 Regulations contained the following material provisions. By Regulation 3 headed "A relevant transfer" it is provided that:
  10. "(1) 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.
    (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 (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person ("a subsequent contractor") on the client's behalf; or
    ….
    And in which the conditions set out in paragraph (3) are satisfied."

  11. Paragraph 2 of Regulation 3 defines economic entity as "an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary". Regulation 3 provides:
  12. "The conditions referred to in paragraph (1)(b) are that-
    (a) immediately before the service provision change-
    (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; and
    (b) the activities concerned do not consist wholly or mainly of the supply of goods for the client's use."

  13. By paragraph 6 a relevant transfer may be effected by a series of two or more transactions and may take place whether or not any property is transferred to the transferee by the transferor.
  14. "Relevant transfer" does not simply appear as a heading to Regulation 3. It is separately defined by Regulation 2 as meaning "a transfer or a service provision change to which these regulations apply in accordance with regulation 3, and "transferor" and "transferee" shall be construed accordingly, and in the case of a service provision change falling within Regulation 3(1)(b) the "transferor" means the person who carried out the activities prior to the service provision change, and the "transferee" means the person who carries out the activities as a result of a service provision change." Regulation 4 provides for the effect of a relevant transfer on contracts of employment. It provides::
  15. "(1) Except where objection is made under paragraph (7), a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee.
    (2) Without prejudice to paragraph (1), but subject to paragraph (6), and regulations 8 and 15(9), on the completion of a relevant transfer-
    (a) all the transferor's rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee; and
    (b) any act or omission before the transfer is completed, of or in relation to the transferor in respect of that contract or a person assigned to that organised grouping of resources or employees, shall be deemed to have been an act or omission of or in relation to the transferee.
    (3) Any reference in paragraph (1) to a person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to a relevant transfer, is a reference to a person so employed immediately before the transfer…"

    It is necessary only then to refer further to sub-paragraphs (7) and (8).

  16. Paragraph (7) makes provision for an employee to object to his contract of employment being transferred to a transferee.
  17. "(8) …. Where an employee so objects, the relevant transfer shall operate so as to terminate his contract of employment with the transferor but he shall not be treated, for any purpose, as having been dismissed by the transferor."

  18. Thornaby Tribunal thought that in the circumstances before them there was no transfer which fell under 3(1)(a). Because of the similarity in concept and wording that reasoning applied also to the predecessor provision under the 1981 Regulations. The Tribunal however concluded that there was a service provision change. The activities which it found to be the relevant activities were "the provision of suitable accommodation and related support services to asylum seekers in Middlesbrough and separately in Stockton". No one has suggested before us that the Tribunal were in error so to categorise the activity concerned. Accordingly we approach this case upon the basis that the Tribunal were entitled to make that finding. We note in passing that the Tribunal at paragraph 1 judged that there was no relevant transfer as defined by the 2006 Regulations. Since they went on to say that there were service provision changes, and to describe in detail those changes, it is plain (and indeed it is accepted by all parties before us) that in saying there was no relevant transfer the Tribunal had wrongly overlooked the definition of relevant transfer in Regulation 2 of the 2006 Regulations. That definition includes a service provision change.
  19. The Employment Tribunal posed itself four issues. Those four issues were first defined at paragraphs 4 and 1 of the decision but restated at paragraph 1.24. The first issue was whether there was ever an old style transfer (by which the Tribunal meant a transfer to which the provisions of the 1981 Regulations applied) or a transfer falling under Regulation 3(1)(a)? Secondly, was there a service provision change as defined by 3(1)(b)? Thirdly, if so when did it take place? And fourthly, if the service provision change took place after 6 April 2006 in respect of each Claimant to whom did their contract of employment or liabilities under or in connection with such contract transfer? It went on to describe, rightly as we see it, that the fourth issue was the hardest for it to resolve.
  20. The Findings in Summary

  21. The Tribunal made the following findings. As to old style transfer it decided that there was not. It gave as its reasoning for that that the economic entities which Leena operated in Middlesbrough and Stockton involved much equipment which was simply not transferred. The accommodation was not the same necessarily and the leases under which that accommodation was occupied were different as enjoyed by Leena from those leases as enjoyed by Kimberley and Angel. In particular Kimberley and Angel secured the benefit of full repairing leases by the landlords and did not have any obligation themselves to externally repair. It may yet be that this is relied upon or is demonstrated to be the reason for the non-employment of maintenance staff by Kimberley and Angel, but of that we say no more for present purposes.
  22. As to the second issue the Tribunal decided that there was a service provision change and that this had taken place on 17 April to Angel and on 8 May to Kimberley. In so determining the Tribunal does not, as it seems to us, distinguish between Middlesbrough and Stockton, but that although they were nominally treating Middlesbrough and Stockton as two separate transfers, if they were transfers, their failure to do so makes no difference in the result given the finding which we shall come to later as to the extent of Angel's subsequent operation in Stockton. Both dates, therefore, were after the coming into force of the 2006 Regulations and thus the service provision change which the Tribunal identified was subject to the provisions of those regulations.
  23. As to the fourth issue the Tribunal decided that there were four possible options. It set these out at paragraph 4.40 of its decision. That reads:
  24. "There are, as we see it, four options:
    (a) The drafting of TUPE 2006 is ineffective to protect employees where there is a change of employer, which will satisfy all the requirements of regulation 3(1)(b) were it not for the fact that no single transferee could be identified as having taken over activities which in the hands of the transferor had its own dedicated sub group of employees assigned to the same specific place or area. Mr Gargan in arguing for this option, [we interpose that he was Counsel then as now for Angel], to his credit, acknowledged that may well not have been what Parliament intended - but it was, he says, what has been written.
    (b) The Tribunal makes an arbitrary allocation of employees between transferees. As we explained at paragraph 4.28 above we, and all representatives, found that absurd.
    (c) The transferee who takes the greater part of the transferor's activities takes all the employees of the transferor. There are two main reasons why this would be unacceptable. First it is plainly unfair and would stifle competition and enterprise. Second, as the facts here show, although the size of the whole of the transferor's activities was ascertainable, without hindsight one cannot tell which of the two transferees acquire the greater part until they have finished the contest between themselves to acquire as much as they can.
    (d) That although the people and their contracts cannot be "split" the liabilities under these contracts can."

    The Tribunal went on to say that they ruled out (b) and (c). The reasons for ruling out (c) appear to be those we had just quoted. This left a choice, in their view, between (a) and (d). Before us a modification or refinement of (c) was discussed in argument, that was the suggestion (principally advanced by Mr Gargan) that the attribution of an employee to a transferee should depend not upon whether the transferee had taken the greater or lesser part of the transferor's activities but should depend upon that part of the transferor's activities to which the employee had been assigned before transfer, so that to the extent those activities continued after transfer he would be so allocated.

  25. The Tribunal determined upon (d). This was undoubtedly a creative option. The Tribunal acknowledged more than once that it represented a judicial fiction. To the work of judicial fiction which they had identified as already encompassing the 1981 Regulations this Tribunal thought it appropriate to add a long chapter. Secondly, the argument was that since the House of Lords had in the case of Litster v Forth Dry Dock & Engineering [1989] IRLR 161 thought it appropriate to add words into the 1981 Regulations, the Tribunal should feel no hesitation in taking the approach it did, although the House of Lords were concerned directly with implementing a European directive, and the Tribunal was not since the paragraph is a domestic extension of the law. Thirdly, it recognised that the decision which it came to did not sit easily with common law, but resolved that problem by saying that it was not impossible for (d) to operate because (see para 4.47) they thought there was no other alternative given the purpose of the Regulations they adopted it. In its closing words the Tribunal indicated much of its approach and the quality of its conclusion by saying:
  26. "we think it is right to rely upon those authorities which advocate a purposive, some may say inventive, construction of TUPE in order to give practical effect even to a particular provision which has no root in the European Directive."

    The appeal

  27. We must emphasise in dealing with the appeals against the decision of the Tribunal what is the scope of the appeals before us. We must emphasise that counsel did not argue here that there had been a transfer under Regulation 3(1)(a). We are not, in this judgment, asked to nor could we, given our appellate function, engage in a wide ranging treatise on the law. We have to resolve this case on its particular facts and more importantly, for future reference, having regard to the cases which are put before us on appeal; an appeal tribunal does not necessarily set out what the law is, it resolves the appeal before it.
  28. In its Notices of Appeal Kimberley, represented by Mr Josling, argued that the Tribunal was in error in determining the date of the transfer to Kimberley. He argued that there was here, truly, no service provision change and the Tribunal were in error so to identify one, and he argued that upon the basis that option (d) was not tenable but neither was option (c) then since no one argued for option (b), that left option (a) that is that there was no service provision change.
  29. Angel, for whom Mr Gargan appeared, argued also that there was no service provision change. He did so by a textual interpretation of the regulations. If there were, contrary to his primary submission, a service provision change then he argued that in the case of Stockton Kimberley and not Angel should succeed to the rights and obligations of the contracts of employment of those who had been engaged in the service provision before, as should be the case in Middlesbrough. But we should mention here as highly relevant that the Tribunal found as a fact that so far as Stockton was concerned only one of the houses which Leena had used to accommodate service users was leased by Angel. All the other accommodation was provided by Kimberley. Given the number of asylum seekers who were accommodated that meant that taking an historical snapshot 97 per cent of the operation in Stockton was performed by Kimberley and 3 per cent by Angel. When it came to Middlesbrough both Kimberley and Angel provided accommodation there. The figures there were 71per cent as the Tribunal found in respect of Kimberley and 29 per cent in respect of Angel.
  30. The Tribunal in accepting option (d) had concluded that the liabilities for the financial consequences of the dismissals of the Claimants which had taken place should fall as to 3 per cent in respect of the Stockton employees upon Angel and 29 per cent in respect of Middlesbrough employees with the balance (97 per cent and 71 per cent respectively) being for Kimberley to discharge. Therefore Mr Gargan was in effect saying in his Notice of Appeal that option (c) should apply. In argument, as we have indicated, he was contending also for the possibility that if a percentage apportionment did not attract the Tribunal then one would look to see where or to which part of the operation an employee was assigned and if an employee was assigned principally to the operations of the business transferred he would be transferred with that part of the business. It would follow from his submissions on either the original option (c) or the revised option (c) that Kimberley would have to discharge the entirety of the obligations to the Claimants in this particular case unless there were further facts to be found or from which it could be argued that any particular employee was assigned to a part of the activities which remained to be operated by Angel.
  31. In response Leena took the stand on paper that there was a service provision change and the percentage approach of division of liabilities taken by the Tribunal in consequence of their adoption of option (d) was correct.
  32. The Claimants represented by Mr Legard for their part also relied upon the Employment Tribunal as having come to a correct conclusion. Mr Palmer, represented by Mr Allen, for his part maintained a similar approach, but in his case on paper cross-appealed because it was his contention that if the appeal of Kimberley or Angel as to the date of the transfer succeeded such that the date of the transfer was prior to 6 April 2006 then the Tribunal was wrong to reject there having been a transfer of an undertaking under the 1981 Regulations (or, it would follow, under 3(1)(a) of the 2006 Regulations). In the event it was unnecessary for him to pursue his cross-appeal because as the argument developed it was plain that Mr Josling did not seek to support his appeal on date nor did Mr Gargan. Both regarded it as a finding of fact. Neither submitted in the end that it was a finding of fact which the Tribunal was disentitled from making. The point was rather more subtle in each case. It was that the difficulty in establishing a date where there is a service provision change of the nature which we have described demonstrated that to describe what had happened as a service provision change may well be wrong. The existence of that difficulty was part of the general material which should have persuaded the Tribunal to a conclusion here that there was in truth no service provision change at all.
  33. Discussion

  34. No one before us contended for option (b). The Tribunal concluded against it because it considered the results arbitrary. We tend to agree though it is unnecessary for us to resolve that issue since no one advances it before us.
  35. We turn to consider the way in which a Tribunal should approach its conclusions in any case in which it is suggested that there has been a relevant transfer. It must first consider whether there is a relevant transfer. The transfers as defined at Regulations 3(1)(a) and 3(1)(b) are not mutually exclusive. That point is made in the explanatory memorandum to the regulations, and is well founded. An old fashioned transfer, as it is being called before us and was by the Tribunal, may also be a service provision change.
  36. If, however, one is looking at 3(1)(b) having excluded 3(1)(a) (as the Tribunal here did in conclusions which, on that, are not appealed from and so we do not revisit) it seems to us that the first question for the Tribunal is to identify the relevant activities or as it may be relevant activity. It is only when that has been done, very much as if this were a 3(1)(a) transfer, where a Tribunal would begin by seeking to identify the relevant economic entity, that the Tribunal can see whether or not those activities come within 3(1)(b)(ii), in this case as being activities which 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.
  37. As to whether there was here a service provision change the Tribunal identified the activities as we have described and no one challenges that description. It seems to us that care may need to be taken by a Tribunal in deciding what it is that constitutes the relevant activities. If, for instance, here the relevant activities had been described as "maintenance operations" then it is possible that there might have been a different conclusion, but we cannot consider that further. The Tribunal found that the activities of providing suitable accommodation and related supported services to asylum seekers in the town concerned had been carried out by a contractor on a client's behalf. That is all that 3(1)(b)(ii) looks at: to see that those activities have ceased.
  38. Turning to Regulation 3(3) it had to consider whether, immediately before the ceasing of activities by a contractor on a client's behalf, there was an organised grouping of employees which had as its principal purpose the carrying out of the activities concerned on behalf of the client. The Tribunal found that there was. Mr Gargan submits that when one looks at Regulation 3(3)(a)(i) the Tribunal is required to consider the carrying out of the activities concerned. Those words refer back, he submits, to the activities identified in 3(b)(ii), those are the activities which cease being carried out. Accordingly he submits that if, for example, an organised grouping of employees carries out 100 per cent of the work of a client in a particular area and let us suppose 30 per cent of that work is after a given date to be performed by another contractor in succession, leaving 70 per cent still to be performed by the original contractor, one cannot say, he submits, that the organised grouping of employees had as its principal purpose the carrying out of the 30 per cent. That is because by comparison of the 30 per cent with the 70 per cent it is obviously lesser. The principal purpose would have to be defined by reference to the 70 per cent which remained. Accordingly in a situation such as Angel faced, he would submit that on that basis there was no service provision change because the employees engaged by Leena never had as a principal purpose the carrying out of the activities thereafter conducted by Angel because if one looked at the principal purpose it would be to carry out the activities now performed by Kimberley.
  39. In our view the word "principal" qualifies the purpose. A distinction is to be drawn between a principal purpose and one which is merely ancillary. We do not see the word "principal" as being concerned with any arithmetically quantitative approach to the service in fact performed. We see it as entirely consistent with the wording and intent of the regulations that, where a service is split and that service is being performed by an organised grouping of employees which has as its principal purpose the carrying out of the service, a quantitative comparison of the service after the transfer, using that word neutrally, as against before is not called for by the regulations. We therefore do not accept his submission, but we recognise that our conclusion as to this is (as will be seen) unnecessary for the resolution of this appeal.
  40. On his approach in any event Kimberley would qualify as the party which did succeed to the service provision change.
  41. A more fundamental objection to there having been a service provision change was argued for by Mr Josling on behalf of the Kimberley. As we have noted, his argument was that because there were significant difficulties with options (b), (c) and (d) that left only option (a) i.e. no service change. But when he developed his argument he submitted that for the purposes of Regulation 4(1) there could only be one transferee. It would be a nonsense, he submitted, to think that a contract of employment could be transferred to two employers who would at one and the same time each have the right to the employee's services even though those employers were or might be in conflict or competition. Accordingly he submitted that the word "transferee" in 4(1) had necessarily to be read in the singular. Because that had to be seen as necessarily in the singular therefore also in Regulation 2 the expression "transferee" in "relevant transfer" had to be seen in the singular and so too, therefore, did "transferee" have to be understood in respect of 3(1)(b)(ii). On his approach, as he confessed when driven to this position in argument, one transferor could not transfer his undertaking or the provision of a service to more than one transferee. That he said was the effect of the regulations.
  42. We cannot accept that position. We cannot accept it for a number of reasons. First, it ignores the fact that Regulation 4 applies to relevant transfers which include but do not consist only of service provision changes. They also include 3(1)(a) transfers. It is well established by a large number of cases that such transfers may take place to more than one transferee even though there is one transferor. Indeed it is always likely given the background to the Transfer of Undertaking Regulations - see the recitals to the directive 77/187/EEC upon which the original 1981 Regulations were based - that there might be a division from one transferor of his operations to more then one transferee. It seems to us that "transferee" can have no different sense when applied to a 3(1)(b) transfer than it does to a 3(1)(a) transfer. Accordingly, it seems to us that "transferee" must be understood in 4(1), as being singular, though "transferee" in Regulation 2 (as would be suggested by section 6 of the Interpretation Act 1978), is capable of being read in the plural. In short the context makes it apparent that 4(1) is looking at the relationship between an employee and his old and new employer necessarily in the singular. It is not looking at a transfer situation as a whole. Regulation 3 is looking at the transfer situation as a whole. It is not necessary nor apparent that "transferee" should be understood as being necessarily singular when one is looking at a service provision change or transfer of an undertaking business or part of an undertaking in 3(1)(a).
  43. Mr Gargan, we add, also founded an argument based upon the contention that if "transferee" had to be read as including the plural in Regulation 2 it would have to be read in the plural thereafter. We consider simply that in Regulation 4(1) the transferee there referred to is, as we suggest, in context, necessarily the single transferee employer of the relevant employee.
  44. We conclude that the Tribunal here was entitled to come to the view that there was a service provision change. It may be that there are 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 a service provision change has taken place. This Tribunal considered whether that was the case here and concluded it was not. We think that since there are two overlapping contracts now providing for activities which were previously provided by one provider that the Tribunal was entitled to come to that view. Having come to that view the question then turns to what the consequence is. We observe that when a Tribunal is examining the question whether there is a service provision change or not it is of course entitled to, and must, look at all the facts and their implications in the round, and it may be that a Tribunal wishes to take into account as indicating that there is no service provision change any difficulties in determining who should take responsibility for an employee's contract after any given date. But as a matter of clarity and logical progression having taken that into account in determining whether there is a service provision change, as this Tribunal here in our view was entitled to do, we turn now to what the consequence is and how Regulation 4 operates.
  45. We begin with the Tribunal's preferred option, option (d). We are somewhat surprised that this was put forward for serious consideration let alone adopted by the Employment Tribunal. First, there is no warrant for the approach the Tribunal took of dividing the liabilities under a contract between two transferees on a percentage basis. There is no warrant for this in statute nor in common law. There is no precedent for it. It is truly novel. Secondly, the Employment Tribunal considered that there could be a separation of the contract of employment from the liabilities, rights, powers and duties under or in connection with such a contract of employment. It did this recognising that it was well established that an employee could not be the servant of two masters at the same time in common law. That would be especially true here where the parties were in competition. It cited, if citation were needed, the SO Bernicia [1989] 1 AC 643 for that proposition. Here apparently the Tribunal considered that what allowed for the division of liabilities on the percentage basis we have indicated was the fact that there had been dismissals of the employees concerned which although unlawful were effective. We consider that the Tribunal did not carry that logic through to consider the consequences nor base it in the regulations.
  46. Regulation 4(2) was the paragraph upon which the Tribunal focused. It took the view that the words "without prejudice to paragraph 1" meant that the provision went further than did 4(1). However, within 4(2)(a) it is provided that the rights, powers, duties and liabilities under or in connection with a contract are in connection with "any such contract". The word "such" refers back to 4(1) and plainly therefore it is entirely linked to section 4(1).
  47. 4(2)(a) does not simply deal with historical liabilities such as those that might be created by the financial after effects of a dismissal. It looks, and may indeed principally look, to the future of a contract rather than arguments over its termination. But the point is that there can be no proper distinction in principle based upon the language which is used in the regulation between a situation in which there has been a dismissal and one in which there has not. If the approach which the Tribunal took is permissible where there has been a dismissal it must also in principle be permissible where there is continuing employment. Thus taking the finding in this case, if an employee can be the servant of two masters, here the employee in Stockton would serve 3 per cent for Angel and 97 per cent for Kimberley. If, as the Tribunal might have envisaged, the common law would provide that he had to be the servant of one or the other the solution adopted by the Tribunal would be that here the employee, let us say employed by Kimberley, would find that Angel were liable on a continuing basis for 3 per cent of his pay, 3 per cent of his bonus, 3 per cent of the sums that might arise on any constructive dismissal for which Angel would not be liable directly but Kimberley would be and that Angel would be liable for breach of discipline at least as to 3 per cent. Indeed as Mr Gargan points out in his written skeleton argument one would be responsible for any conclusion as to whether there was an economic, technical or organisational reason for any dismissal consequent upon the transfer.
  48. The difficulties caused by this approach, let alone the absence of any proper conceptual basis for it, demonstrates that it cannot be right. But in any event Regulation 4(8) also provides a reason within the Regulations for suggesting that this approach is untenable. If the employee objects then his contract continues in effect with the transferor. The Tribunal's approach would suggest that because there can be a divorce between the contract and the rights and liabilities under or in connection with it, such an employee, it would seem, would remain in employment with the transferor but the rights, duties and liabilities would be those of the transferee. That is, we venture to suggest, plainly not the intention of that provision.
  49. We think that the Tribunal here was focusing on the effect on the employer rather than the employee in seeking to achieve what it saw as an equitable distribution of the liabilities which arose. Whatever the value of that might be in alternative dispute resolution procedures involving the employers it cannot, as we see it, derive from an application of the Regulations which is where the Tribunal's jurisdiction begins and ends.
  50. The next reason is that "relevant transfer" is, as we have pointed out already, a phrase which covers both 3(1)(a) and 3(1)(b) transfers. Accordingly, if the Tribunal's approach has validity it must apply equally to transfers under 3(1)(a) as it does to those under 3(1)(b). Since transfers under 3(1)(a) are well recognised in law and since it has never been suggested successfully so far as we know that a proportionate approach should be taken in the past where there has been a transfer by a transferor to more than one transferee we think that the sheer weight of case law itself suggests that there is authority against the Tribunal's approach.
  51. Next, as we have pointed out service provision change and the transfer of undertaking business or part of an undertaking are not mutually exclusive. One would therefore expect the same approach to apply to each and it seems to us therefore that we are entitled to derive help from the case law relating to what was the predecessor of 3(1)(a) under the 1981 Regulations. Accordingly we have no difficulty in rejecting the Tribunal's creative approach to (d).
  52. We do not see why it was the Tribunal rejected option (c). It gave two, or possibly three, reasons. The principle was that of "acceptability": that is what the decision is plainly based upon. We have some difficulty with this. A case should not be determined upon whether the result is seen as broadly acceptable or unacceptable. The question must be whether that is what the law provides or not. The first reason which showed this Tribunal that it was unacceptable was that it was "plainly" unfair and would stifle competition and enterprise. If it is unfair then, as was pointed out by Mr Legard, correctly in our view, the unfairness that was being talked about was unfairness to the employer or transferee rather than fairness or unfairness to the employee. The principal focus of the 2006 Regulations is upon safeguarding the position of the employee. It is not directly concerned with fairness or unfairness to the employer though no doubt that will be a relevant if marginal consideration. The Tribunal link unfairness with stifling competition and enterprise. That it seems is not a matter for us but a matter for the legislature. The economic effects of employment regulations are not broadly for Tribunals.
  53. The second reason it gave was that although the size of the whole of the transferor's activities were attainable one could not tell without hindsight which of the two transferees would acquire the greater part. It referred to a "contest" between the transferees. We simply do not understand this finding in the context of this case. The Home Office determined by contract which of Kimberley or Angel did what service for it. This was not, as we understand the facts, a free-for-all in which Kimberley or Angel could by their own efforts allocate a larger part of the contract to one or the other. The activities were pre-allocated. Hindsight is simply not required. It may well be that there was fluidity in the number of asylum seekers, and for that matter the number of properties that would therefore be needed to accommodate them. But fluidity because of changing demands is inevitable in any business, as indeed one of the lay members of this Tribunal has been keen to point out. It does not constitute a reason for deciding that there is such uncertainty as to invalidate option (c). However, on analysis as we see it, if there is fluidity here as a reason for telling against option (c) so also does exactly the same reason tell against option (d). The result under option (d) was to settle upon percentages. The fluidity of numbers would inevitably affect the precise percentage at any given time. The argument about hindsight is equally applicable therefore to (d) as it is to (c). In short, the second reason given by the Tribunal was not and could not be a reason for preferring (d) over (c). The enquiry must be, as it seems to us, whether or not the option is in accordance with the Regulations.
  54. Conclusion

  55. Given that there is here a finding which the Tribunal was entitled to make that there had been a service provision change in respect of the relevant activity, there was a relevant transfer. It is well established in the law relating to the transfers of undertakings that there may be difficulties in determining whether a given employee remains with a transferor or is transferred with the undertaking which is transferred. The European Court of Justice considered in Botzen v Rotterdamsche Droogdok Maatschappij B.V. [1985] ECR 519 if the rights and obligations under the contracts of employment of employees of an administrative department which was not transferred where that department carried out duties for the benefit of a transferred part of an undertaking should be considered as passing to the transferee or remaining with the transferor. The conclusions given by the European Court of Justice in paragraphs 13-15 of the report were these:
  56. "13. Rotterdamsche…claims that only employees working full-time or substantially full-time in the transferred part of the undertaking are covered by the transfer of employment relationships, to the exclusion of those engaged in partial tasks in various businesses or parts of businesses and those who, although working for several businesses or parts of businesses, form part of the remaining staff.
    14. On the other hand, the Commission considers that the only decisive criterion regarding the transfer of employees' rights and obligations is whether or not a transfer takes place of the department to which they were assigned and which formed the organisational framework within which their employment relationship took effect.
    15. The Commission's view must be upheld. An employment relationship is essentially characterised by the link existing between the employee and the part of the undertaking or business to which he is assigned to carry out his duties. In order to decide whether the rights and obligations under an employment relationship are transferred under Directive 77/187 by reason of a transfer within meaning of article 1(1) thereof, it is therefore sufficient to establish to which part of the undertaking or business the employee was assigned."

    That was applied in the domestic jurisdiction in the case of Duncan Webb Offset (Maidstone) Ltd v Cooper [1995] IRLR 633. That was a case in which a company owned subsidiary companies in the printing industry at Maidstone, Basildon and St Albans. Three employees worked for the group. The Maidstone business was transferred in a transfer to which the 1981 Regulations applied. The three employees who worked for the group were not on the list of those employees who were to be transferred. When they complained an Employment Tribunal found that they spent some of their time working for the undertakings at Basildon and St Albans but 80 per cent of the time, broadly speaking, in each case working for the Maidstone operation. This Tribunal, Morrison J presiding, considered that the Employment Tribunal were entitled to come to the conclusion they did that those employees were transferred with the Maidstone operation notwithstanding that some of their duties, no doubt on a somewhat fluctuating basis we might add, were performed for others than Maidstone.

  57. In paragraph 15 of the decision Morison J said that it was helpful to consider as a factual situation the following:
  58. "X has a business in which he employs a number of people. X transfers part of his business to Y. In order to determine which employees were employed by X in the part transferred it is necessary to ask: which of X's employees were assigned to the part transferred - see Botzen. In Gale [1994] IRLR 292 it was suggested that the question might be asked whether a particular employee was 'part of the … human resources' of the part transferred, which is the same thing put another way. The contracts of employment of those who were so assigned will, unless the employees object, pass over to the transferee, thus giving effect to the purpose of the Regulations and the Acquired Rights Directive, pursuant to which they were made, that an employee should not forfeit his job because of a change in the identity of his employer."

    Then he said this:

    "There will often be difficult questions of fact for Industrial Tribunals to consider when deciding who was 'assigned' and who was not. We were invited to give guidance to Industrial Tribunals about such a decision, but decline to do so because the facts will vary so markedly from case to case. In the course of argument a number were suggested, such as the amount of time spent on one part of the business or the other; the amount of value given to each part by the employee; the terms of the contract of employment showing what the employee could be required to do; how the cost to the employer of the employee's services had been allocated between the different parts of the business. This is, plainly, not an exhaustive list; we are quite prepared to accept that these or some of these matters may well fall for consideration by an Industrial Tribunal which is seeking to determine to which part of his employer's business the employee had been assigned."
  59. There is, therefore, a well established approach in cases which may, as Morison J recognised, involve very difficult questions of fact. There is not necessarily an exhaustive list of factors which will conclusively determine to which part of an undertaking an employee is assigned or in a case such as the present to which aspect of the activities involved in service provision the employee is assigned. The overall principle, however, we consider is clear. What is to be focused upon is essentially the link between the employee and the work or activities which are performed.
  60. Most cases will, we hope, be relatively easy to resolve. Some will necessarily involve great difficulties. Some of those difficulties have been elegantly set out by advocates before us, notably Mr Gargan, but they are difficulties of fact and not of principle for a Tribunal ultimately to resolve. In our view therefore the approach which this Tribunal should on the law have adopted was that which is an adaptation of option (c). They should in effect have applied the principles deriving from Botzen recognised in Duncan Webb Offset and applied in the cases of relevant transfers up until now which have taken place under what is now Regulation 3(1)(a). We see no principled reason for there being any different approach in respect of 3(1)(b) service provision changes. We note again that a transfer may be one or the other or both and it seems to us therefore that because their effect is looked at in the same light in Regulation 4 that no difference of approach should be taken as to the test to determine whether an employee's contract is transferred with any particular part of the undertaking or service provision.
  61. The appeals

  62. It follows that the appeals must be allowed to the extent that the appeal of Angel is allowed and a finding substituted that so far as Stockton was concerned the rights, duties and liabilities under the contracts of the Claimants Holden, Close and Palmer should fall entirely upon Kimberley.
  63. Taking the approach we have identified so far as Middlesbrough is concerned, we were concerned whether there might be some further facts which were capable of exploration by the Employment Tribunal that might indicate that one or other employee was in truth allocated to the part of the Middlesbrough operations to which Angel has succeeded. We are however told by counsel that there is no further fact which they consider would usefully be identified by the Employment Tribunal if there were to be remission. Each counsel, for slightly different, but broadly economic and practical reasons, invites us to exercise our own powers rather than remitting the case. We consider it is sensible to do so. The only material we have to go on (which may be much more limited then it will be in any subsequent case raising the same problem) is the percentage division as between 29 per cent of the activities performed in Middlesbrough after the relevant date by Angel as against 71 per cent by Kimberley. It seems to us however that the percentages are such that we can have little doubt that, there being no other relevant facts, the contracts and the rights, duties and liabilities under the contracts of the three Middlesbrough employees Bibby, Miller and Hambley should be regarded as passing to Kimberley.
  64. Accordingly the appeal succeeds with the result that in respect of both of the transfers we have been considering the liabilities will fall now upon Kimberley and will not be apportioned on a percentage basis as between Kimberley and Angel. The cross-appeal is not being pursued and stands dismissed.


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