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United Kingdom Employment Appeal Tribunal |
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You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Guvera Ltd v C Butler & Ors [2017] UKEAT 0265_16_2111 (21 November 2017) URL: http://www.bailii.org/uk/cases/UKEAT/2017/0265_16_2111.html Cite as: [2017] UKEAT 265_16_2111, [2017] UKEAT 0265_16_2111 |
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At the Tribunal | |
On 2 November 2017 | |
Before
THE HONOURABLE MR JUSTICE LAVENDER
(SITTING ALONE)
APPELLANT | |
(2) BLINKBOX MUSIC LIMITED (IN LIQUIDATION) (3) BB MUSIC HOLDINGS LIMTED (IN ADMINISTRATION) |
RESPONDENT |
Transcript of Proceedings
JUDGMENT
Claimant
For the Appellant | MR DAVID READE (One of Her Majesty's Counsel) Instructed by: Morgan Lewis & Bockius Condor House 5-10 St Pauls Churchyard London EC4M 8AL |
For Ms C Butler and 12 other individual Respondents | MR JASON GALBRAITH-MARTEN (One of Her Majesty's Counsel) Instructed by: Bates Wells Braithwaite LLP 10 Queen Street Place London EC4R 1BE |
For himself and 59 other individual Respondents |
MR JONATHAN DAVID EDWIN WRIGHT (The Respondent in Person) |
For the remaining individual Respondents | No appearance or representation by or on behalf of the Respondents |
For the Second Respondent | No appearance or representation by or on behalf of the Respondent |
For the Third Respondent | No appearance or representation by or on behalf of the Respondent |
SUMMARY
TRANSFER OF UNDERTAKINGS - Transfer
An appeal against the Employment Tribunal's decision that there was a TUPE transfer under regulation 3(1)(a).
The appeal was dismissed because: (1) the grounds of appeal for which leave had been granted were not pursued; and (2) the submissions actually advanced did not disclose any error of law on the part of the Tribunal.
THE HONOURABLE MR JUSTICE LAVENDER
(1) Introduction
(1) 79 individuals who were formerly employed in the Business. 13 of them were represented at the hearing by Mr Galbraith-Marten. Another 60 were represented by one of their number, Jonathan David Edwin Wright, who adopted Mr Galbraith-Marten's submissions. The remaining 6 did not appear and were not represented, although 4 of them had submitted answers indicating that they intended to resist the appeal.
(2) Blinkbox Music Limited ("Blinkbox"), which was the employer of the individual Respondents prior to the disputed transfer. Blinkbox went into administration on 11 June 2015 and is now in liquidation. Its liquidators indicated that they were happy to abide by the decision of the Employment Appeal Tribunal.
(3) BB Holdings Limited ("BB"), which: (a) is a subsidiary of Guvera; (b) was from 23 January 2015 the parent company of Blinkbox; and (c) was formerly known as Guvera UK Limited. Like the Tribunal, I will refer to it as Guvera UK. It did not play any part in the hearing before the Tribunal and it did not play any part in this appeal. Indeed, I was told that it has been dissolved.
(2) The Facts
(1) The first period was from 23 January to the end of April 2015: see paragraphs 154 to 159 of the Tribunal's Judgment. The Tribunal found that there was no transfer during this period. The Business remained with Blinkbox, under the directorship of Mr de Vere, who had been given 90 days by Mr Herft to turn the Business round.
(2) The second period was from the end of April to 11 May 2015, when Mr de Vere resigned as a Director of Blinkbox: see paragraphs 160 to 163 of the Tribunal's Judgment. Insolvency was in prospect for Blinkbox, and Guvera was considering its options and was interested in acquiring Blinkbox's assets and about 20 employees. However, the Tribunal found that there was no transfer during this period, as the Business remained "under the control of Blinkbox, Mr de Vere as its director and its own senior management team".
(3) The third period started on 12 May 2015, when Damien King, Guvera's Chief Technical Officer, arrived at Blinkbox following Mr de Vere's departure, and continued until Blinkbox went into administration on 11 June 2015: see paragraphs 164 to 190 of the Tribunal's Decision. The Tribunal found that there was a transfer at the start of this period, when Guvera assumed day to day control of the Business, in a way that went beyond the mere exercise of ordinary supervision or information gathering between parent or subsidiary.
(1) It was Mr Herft's intention that "we restructure next week".
(2) Guvera's goal was to buy the assets of Blinkbox "without triggering major HR issues".
(3) Mr King was to find a way to work with the best 14 technical and product staff and 6 "admin, finance, sales, reception etc" staff.
(4) Mr King was told, "Don't let de Vere tell you who to keep and what you should do". (Mr de Vere was at this time still Blinkbox's sole director.)
(5) Mr Herft said that he was going to remove Mr de Vere. (In fact, Mr de Vere resigned before he could be removed.)
(6) Mr King was told to find out if Miklos Parrag (one of the senior managers of Blinkbox) "will comply" and, if not, to indicate that "we will be terminating his position when we restructure next week" and then to take the same approach with each next senior person in turn. Mr Herft added, "Miklos will report to you if he stays - if he doesn't like it he can leave".
(7) Mr King was to meet with Juliet Carp of the solicitors, Dorsey & Whitney. (Mr King first did so on 11 May 2015, before he went to Blinkbox's offices.)
(8) Mr Herft wanted advice as to how he, as a director of Guvera, could see the general ledger of Blinkbox and, specifically, every payment out in the last 60 days.
"60. On Tuesday 12 May 2015 Mr King went to the Blinkbox Music offices in London and met various staff. He emailed Mr Anderson asking him to provide to Mr Herft how much cash in bank, last three bank statements and accounts payable. Mr King also reported that about a dozen staff were in the London office as Mr de Vere had suggested they work from home. Mr Herft asked is Mr Parrag was there and added: "If he wants to keep his job tell him to come in & email me what I need." Mr King contacted Mr Parrag who responded that he did not know Mr King was coming in that day but offering Skype or to take a call.
61. Mr Anderson emailed Mr Herft the information he required. In a reply Mr Herft commented: "I think it is best no payments are made at this point & we meet with the liquidators today or tomorrow to discuss options." He indicated that Guvera had funds to invest/loan across to BB but needed to work out best way forward with lawyers and liquidators and "how we immediately cut burn rate (which should have happened more aggressively 90 days ago).""
"83. On Monday 18 May 2015 Mr King spoke to the remaining Blinkbox employees in the London office. Mr Herft did not, in the event, prepare slides for him, but did speak to him beforehand. Mr King began: "This is day one people by the way, this is like a new team. So forget about everything in the past, leading forward, this is the first time you will be reporting up to the Guvera Global and the Guvera Headquarters ". He referred to Mr de Vere having failed to raise funding and achieve cost reductions within 90 days "[a]nd because of that, Guvera Limited, as the organisation, has decided to take Blinkbox into the fold under a different structure "."
"182. Further, in announcing to staff that they were now part of Guvera, he was not announcing a change that had just been implemented that day, but, as it were, making official what had already taken place. "
"184. When Mr Christiansen arrived, on 26 May 2015, the plan was plainly that he was to be the effective chief executive of the Blinkbox Music business for an indefinite period to come (though not given that title), and that, through him, Guvera was to be seen as, openly, in charge. This was reflected in particular, in his own pronouncements to the workforce upon arrival. He also made a point of making clear that it was he, not Mr Chalk, who was in charge, and accurately described him as a paper director, going back to the reasons for his original appointment. I was not persuaded by his attempts, in cross-examination, to explain away that remark."
(3) The Tribunal's Directions on the Law
"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;"
(1) A sale of the share capital in a limited company does not, as such, amount to a transfer of an undertaking.
(2) The fact that one company is the wholly-owned subsidiary of another does not, of itself, mean that the parent controls the business of the subsidiary.
(3) However, these principles do not preclude a scenario in which, at the same time as, or following, a share sale, there is also a transfer of the undertaking in question, from the company which was the subject of the share sale to another company in the group which it has joined as a result of the share sale.
(4) "The governing principles when determining whether there has been a transfer of undertaking have been stated many times in the authorities. It is a multi-factorial test and no single factor is decisive either way. See, in particular, the Spijkers case [1986] ECR 1119."
"143. Firstly, following a share sale, and the company in question joining a new group, a transfer will occur if, and when, another company in the acquiring group assumes control, in the requisite sense, of the business in question, whether or not assets of the business are acquired at the same time.
144. Secondly, a distinction, must, for these purposes, be drawn between the measure of practical influence or control which (without offending the legal principle in Allen) practically comes with being a parent company, and the greater degree of day to day control which must be assumed for a transfer of undertaking to occur. Whether, or when, this line has been crossed in a particular case is a fact-sensitive question for the appreciation of the Tribunal.
148. Thirdly, one needs to be alert to a potential ambiguity in the use of the word "responsibility". It is the acquisition of responsibility for the business, in the sense of sufficient control of the business, that will, if it occurs, lead to the inheritance of responsibility (in the sense of legal liability) for the employees in question. In Housing Maintenance Solutions Limited v McAteer [2015] ICR 87 (EAT) Slade J (at paragraph 46) put it, pithily, like this: "It is the assumption of responsibility by the transferee as employer for previous employees of the transferor by reason of the operation of TUPE which is referred to in Celtec. That assumption of responsibility occurs on the date of the transfer of the undertaking not vice versa.""
(4) The Tribunal's Conclusions
"164. However, with Mr de Vere's abrupt departure, and upon the arrival in London of Mr King's delegation, the course in fact pursued and directed by Mr Herft, on behalf of Guvera, took a new turn, and the third period now began. In light of all my findings of fact, I concluded that, from this point on, Guvera was certainly concerned, and made efforts, to acquire de facto and day to day control of the key operations of Blinkbox going forward. This was done, in summary, for the following reasons.
168. My conclusion reflects my appraisal of the picture painted by all the facts and circumstances, and I will not attempt to restate them all, in this part of my decision. But I note, in particular, the following features of matters in this phase of things that began, effectively with Mr de Vere's departure and the arrival of Mr King's delegation in the UK.
169. Firstly, Mr Herft, from this point, not only sought to, but successively did, exercise influence over a number of key business decisions, particularly in relation to making, or not, of payments to creditors, key players such as PRS, and the all-important question of dialogue with the labels over renewal of the licences.
170. Secondly, steps were immediately taken to implement further redundancies on the sort of scale that Mr Herft envisaged would now have to be carried out. It was the figures envisaged by Mr Herft that were Mr King's, and Smith & Williamson's benchmark, in their discussions with the local senior management about that exercise.
171. Thirdly, it was clearly Mr King who was in charge of, and took the effective decisions, in relation to that exercise, regarding how many redundancies would be declared, and who would stay. He was dependent on information from the senior management team, and which had previously been compiled by Mr Parrag and Mr de Vere, but he chaired all the meetings, briefed Smith & Williamson and Mr Chalk, and was the effective decision maker.
185. Standing back, and looking at the bigger picture, these features, did, it seems to me, reflect a reality in which, from the start of this third period, Guvera did assume day to control [sic] of the business of Blinkbox, crossing a line beyond the element of de facto control, and information acquisition, which comes with being a corporate parent, in a way that amounted to taking over conduct of its day to day activities.
190. For all the foregoing reasons I have concluded that, in the wake of Mr [de Vere's] resignation, and effectively from the moment of Mr King's arrival in the London office on 12 May 2015, following Mr de Vere's departure from the scene, Guvera assumed day to day control of the Blinkbox Music business, in a way that went beyond the mere exercise of ordinary supervision or information gathering between parent and subsidiary, and crossed the legal line identified by the Court of Appeal in Millam."
(5) The Grounds of Appeal
"(1) The point of law is that the Tribunal misdirected itself on the law by focusing on the degree of control said to be exercised by the Appellant over the Second Respondent rather than focusing on the true question as to whether control had actually passed from the Second Respondent to the Appellant. (2) Further and in the alternative, a transfer based on 'assuming control' requires precise findings of fact as to the point of 'transfer' and the degree of 'control' that is exercised. The Tribunal failed to identify with any precision and as a result erred as to the date the transfer took place."
(6) The First Ground of Appeal
(1) He submitted that, by focusing on the issue of control in paragraphs 143 and 144 of its Judgment, the Tribunal wrongly excluded the other factors which were relevant to the "multi-factorial test" established in the Spijkers case.
(2) He submitted, in particular, that the Tribunal wrongly failed to appreciate that it is a necessary condition for a transfer that the transferee has assumed some of the responsibilities of an employer towards the employees of the undertaking.
(1) the Tribunal was wrong to focus on the issue of control; and
(2) by focusing on the issue of control, the Tribunal had ignored a necessary condition of a transfer.
(1) It is undoubtedly one of the consequences of a transfer that the transferee assumes the obligations of employer. The following sentence from paragraph 12 of the judgment of the Court of Justice of the European Communities in the case of Landsorganisationen i Danmark v Ny Mψlle Kro (Case 287/96) [1989] ICR 330 has been much cited (although the emphasis is mine):
"12. The Directive is therefore applicable where, following a legal transfer or merger, there is a change in the legal or natural person who is responsible for carrying on the business and who by virtue of that fact incurs the obligations of an employer vis-ΰ-vis employees of the undertaking, "
(2) One relevant factor in deciding whether there has been a transfer may consist of action taken by the transferee, such as the payment of wages, which could be described as assuming the obligations or responsibilities of the employer. This is to be considered as one factor in the multi-factorial test.
(3) But it is not a necessary condition for a transfer that the transferee has acted in such a way. No decided case, properly understood, supports such a conclusion. Indeed, to elevate one factor to the status of a necessary condition for a transfer would be inconsistent with the concept of the multi-factorial test, where no single factor is decisive. It would also risk undermining the policy underlying the Regulations, as I have said.
"83. What, in my judgment, emerges from the CJEU cases of Berg v Besselsen and CLECE SA v Martin Valor, cited above and from the Court of Appeal's decision in Millam is that the critical elements of the test are whether the new party (i) has become responsible for carrying on the business, (ii) has incurred the obligations of employer and (iii) has taken over day to day running of the business. It seems to me that those elements of the test can be captured in more colloquial terms - "Has the new party stepped into the shoes of the employer?""
(7) The Second Ground of Appeal
(8) Conclusion
Note 1 I am grateful to Mr Reade for pointing out that Mr Baldwin may have been quoting an exchange between Lord Beaverbrook and Rudyard Kipling: see Baldwin Papers: A Conservative Statesman, 1909-1947 (CUP, 2004) ed. Williamson, p. 258, fn. 59. [Back]