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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Alderson & Ors v Secretary of State for Trade and Industry [2003] EWCA Civ 1767 (08 December 2003) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2003/1767.html Cite as: [2004] 1 All ER 1148, [2004] ICR 512, [2003] EWCA Civ 1767 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
The Hon Mr Justice Newman
Strand, London, WC2A 2LL |
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B e f o r e :
LADY JUSTICE ARDEN
and
LORD JUSTICE DYSON
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Mark Alderson & Ors |
Appellant |
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- and - |
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Secretary of State for Trade and Industry |
Respondent |
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Smith Bernal Wordwave Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Nicholas Paines, QC and Kassie Smith (instructed by Treasury Solicitors) for the Respondent
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Crown Copyright ©
Lord Phillips MR :
This is the judgment of the court.
"the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger"
The ARD contains no definition of 'undertaking' or of 'business'. The United Kingdom attempted to give effect to the ARD by SI No 1974, the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("TUPE"). TUPE included the following definition of 'undertaking'.
"'Undertaking' includes any trade or business but does not include any undertaking or part of an undertaking which is not in the nature of a commercial venture"
The effect of the phrase that we have placed in italics is the vital issue in this appeal. We shall refer to this phrase as "the words in italics".
i) Was there a transfer of "an undertaking, business or part of a business" within the meaning of the ARD? If so:
ii) Was the "undertaking, business or part of a business" transferred "in the nature of a commercial venture" so as to fall within the protection of TUPE?
Newman J held, contrary to the submission of the Secretary of State, that the Council's refuse collection service was "an undertaking, business or part of a business" and that it was transferred from the Council to Onyx. There is no appeal against that finding.
Background history
"…. the proper meaning of the words 'in the nature of a commercial venture' is very much a matter of first impression. The majority form the view that undoubtedly the operation conducted by the first respondents was an undertaking in the sense at least of being a trade or business but that the operation was excluded from being an undertaking within the meaning of the Regulation because it was not in the nature of a commercial venture. The way that it was organised, conducted (particularly the way its finances were conducted), the fact perhaps above all of its charitable status combined, in the judgment of the majority, to make it an enterprise which could not fairly be described as an undertaking in the nature of a commercial venture."
"For my part, although as a general guide I think that the fact that a venture or enterprise is entered into with a view to making a profit is a consideration in deciding whether or not it is in the nature of a commercial one, that is only a general guide and I prefer the first impression approach of the Employment Appeal Tribunal to the particular question in issue. I think that it is impossible to define 'in the nature of a commercial venture' so as to cover every particular set of circumstances. I think I know a commercial venture when I see one and I did not recognise the operation of this school in the manner found by the Industrial Tribunal as a commercial venture. The way in which it was organised, to which the Employment Appeal Tribunal referred, is of course a consideration in enabling me to recognise or not to recognise the school as being an enterprise in the nature of a commercial venture. There are many considerations which one has to bear in mind in taking a global view of the school as a whole. The religious background, the charitable status, the unpaid committee are all considerations. The fact that fees are paid, that the object of the Committee is certainly not to make a loss, but year in year out overall to break even which necessarily involves the making of a profit in one year if a loss is likely in the next, or building repairs have to be done, are also considerations which I bear in mind in deciding whether or not I recognise this particular enterprise as being in the nature of a commercial venture or not.
Without in any way seeking to give a definition but to express the sort of indication which would have its effect upon my mind, I refer to two definitions, one in the large Oxford Dictionary and one in the concise volume where in the first 'commercial' is defined in one definition as 'viewed as a mere matter of business, looking towards financial profit', and in the concise volume the first definition of 'commercial' is 'of, engaged in, bearing on commerce, interested in financial return rather than artistry'. It is 'rather than artistry' which I think is the pointer which has an effect on my mind in preventing me from recognising this enterprise as being in the nature of a commercial venture."
"The third complaint
40 The Commission argues in its third complaint that the United Kingdom Regulations of 1981, as interpreted by courts and tribunals in the United Kingdom, do not apply to non profit making undertakings, contrary to article 1(1) of Directive (77/187/E.E.C.), as interpreted by the court. The Commission refers in this connection to Dr Sophie Redmond Stichting v Bartol (Case C-29/91) [1992] ECR I-3189.
41 Regulation 2(1) of the Regulations of 1981 defines an 'undertaking' as including 'any trade or business' but expressly excludes 'any undertaking or part of an undertaking which is not in the nature of a commercial venture.' According to the Commission, whose contentions have not been seriously challenged by the United Kingdom, the Regulations of 1981 must be interpreted as not applying to transfers of non profit making undertakings.
42 The United Kingdom submits that the Directive cannot apply, as the Commission claims, to transfers of non profit making undertakings, on the ground that such undertakings, which are not engaged in 'economic activities' within the meaning of the E.E.C. Treaty, do not come within its scope.
43 That argument must be rejected.
44 The court has already accepted, at least implicitly, in the context of competition law (see Höfner v Macrotron G.m.b.H. (Case C-41/90) [1991] ECR I-1979) or social law (see, in fact, for the application of the Directive, the Dr Sophie Redmond Stichting case [1992] ECR I-3189), that a body might be engaged in economic activities and be regarded as an 'undertaking' for the purposes of Community law even though it did not operate with a view to profit.
45 It follows from those judgments that the fact that an undertaking is engaged in non profit making activities is not in itself sufficient to deprive such activities of their economic character or to remove the undertaking from the scope of the Directive.
46 Accordingly, the scope of the Directive cannot, as the United Kingdom contends, be limited to undertakings which operate with a view to profit.
47 It follows that by restricting the application of the national rules transposing the Directive to transfers of profit making undertakings, the United Kingdom has failed to fulfil its obligations under article 1(1) of the Directive. The Commission's third complaint is therefore well-founded."
"39. … The decision in the Commission's case was on the basis of a concession made by the United Kingdom that non-profit-making organisations are excluded by the Regulations. That concession is not binding on the parties, or on the industrial tribunal or on this tribunal. No such concession has been made by the parties in this case. The Court made no determination of the scope of the derogation in reg. 2.
40. Further, as far as the regulations were interpreted by the European Court of Justice (which we do not believe they were), that Court's powers are limited to the interpretation of community law, and do not extend to the interpretation of domestic law. That is a matter for the domestic court."
"(a) This Directive shall apply to any transfer of an undertaking, business or part of an undertaking or business to another employer as a result of a legal transfer or merger.
(b) Subject to subparagraph (a) and the following provisions of this Article, there is a transfer within the meaning of this Directive where there is a transfer of an economic entity which retains its identity, meaning an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.
(c) This Directive shall apply to private or public undertakings engaged in economic activities whether or not they are operated for gain. An administrative reorganisation of public administrative authorities, or the transfer of administrative functions between public administrative authorities, is not a transfer within the meaning of this Directive."
This expanded definition of 'undertaking' does not represent a change from the meaning of undertaking in the ARD, prior to amendment, but seeks to spell out more clearly the meaning of 'undertaking' in light of the jurisprudence of the ECJ. The new definition was first introduced by Directive 98/50/EC which amended the ARD.
"(a) In making the Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981/1794) the Secretary of State for Employment by excluding undertakings not in the nature of a commercial venture failed to achieve the result required by Council Directive 77/187/EEC; and
(b) By reason of the legal principles recognised and applied by the European Court of Justice in the decisions of Francovich & another v the Italian Republic (Case C6/90); Brasserie du Pecheur v Federal Republic of Germany and R v Secretary of State for Transport ex parte Factortame Limited and others (No 4) (Joined Cases C-46/93 and C-48/93) [1996] ECR 1-1029 and R v Her Majesty's Treasury ex parte British Telecom plc (Case C-392/93) [1996] ECR 1-1631 the Plaintiffs are entitled to be compensated by the Defendant for any loss which they establish has been caused by the Defendant's breach of European Community law in failing to achieve the result required by Council Directive 77/187/EEC as aforesaid."
Newman J's decision
"As a matter of impression the following factors or circumstances in connection with the Council's refuse collection service, taken together, identify the nature of the undertaking:
i) The performance of a service to individual and identifiable members of the public, who by reason of charges imposed upon them were obliged to pay for the service. I do not regard the indirect nature of the charge or part payment for the service as significantly affecting the essential character of the transaction or service.
ii) The service was performed by paid employees and managed throughout by paid employees.
iii) In order for the service to be provided the Council had to maintain an internal management, follow accounting procedures, acquire assets (vehicles) and give over the use of property and land to the service.
iv) Although not bound to make a profit, the Council were subject to requirements of sound and prudent stewardship in the use of public moneys. It ran the risk of making a loss.
v) The service or function, although derived from statute, gained no further colour or character from the statutory background. It was required to be cost effective and efficient to meet the requirements of the householders.
vi) The power to charge for certain aspects of the service serves to confirm the lack of significance in the main charge being indirectly levied.
For the above reason I conclude the Council were carrying on an undertaking in the nature of a commercial venture prior to transfer."
Submissions
The approach to construction
Order:
1. Appeal dismissed as per draft order agreed between counsel.
2. Appellants to pay the respondents costs of the appeal to be subject to detailed assessment if not agreed