![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |||||||||
United Kingdom Employment Appeal Tribunal |
||||||||||
PLEASE SUPPORT BAILII & FREE ACCESS TO LAW
To maintain its current level of service, BAILII urgently needs the support of its users.
Since you use the site, please consider making a donation to celebrate BAILII's 25 years of providing free access to law. No contribution is too small. If every visitor this month gives just £5, it will have a significant impact on BAILII's ability to continue providing this vital service.
Thank you for your support! | ||||||||||
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Snr Denton UK LLP v Kirwan & Ors (Transfer of Undertakings : Service Provision Change) [2012] UKEAT 0158_12_1007 (10 July 2012) URL: https://www.bailii.org/uk/cases/UKEAT/2012/0158_12_1007.html Cite as: [2012] IRLR 966, [2012] UKEAT 158_12_1007, [2012] UKEAT 0158_12_1007, [2013] ICR 101 |
[New search]
[Context]
[View without highlighting]
[Printable RTF version]
[Help]
EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8JX
At the Tribunal
Before
THE HONOURABLE MR JUSTICE LANGSTAFF (PRESIDENT)
(2) JARVIS PLC (IN ADMINISTRATION) & OTHERS RESPONDENTS
Transcript of Proceedings
JUDGMENT
APPEARANCES
MR
![]() (One of Her Majesty’s Counsel) Direct Public Access
|
|
(of Counsel) Instructed by: Backhouse Solicitors Carlton House 101 New London Road Chelmsford Essex CM2 0PP
|
|
For the Second Respondents |
No appearance or representation by or on behalf of the Second Respondents |
SUMMARY
TRANSFER
OF
UNDERTAKINGS
– Service provision change
The Claimant solicitor worked in‑house for a facilities management company which ran into financial difficulties. In consequence she was engaged in disposing of service contracts to third parties. Administrators were appointed, who had previously engaged the Appellant as solicitors to act for them in the administration. Their work in doing so involved disposing of the company’s contracts. The Claimant, who had been purportedly made redundant five days after the administration began, argued that there had been a service provision charge. An Employment Tribunal at preliminary hearing agreed with her. Since then, two decisions (Key2Law and Edenwest) had supported the Appellant’s submissions that the identity of the “client” before and after the SPC had to be one and the same, and that it could not be said that the statutory provision that administrators acted as agents of the company in exercising their functions meant that the client for whom the services were provided was the company, rather than just the Appellant.
Held: there had been no service provision change. ET overruled.
THE HONOURABLE MR JUSTICE LANGSTAFF (PRESIDENT)
Introduction
1.
This appeal gives rise to three interesting questions relating to a service
provision change under Regulation 3 of the Transfer
of
Undertakings
(Protection of Employment) Regulations 2006 (TUPE). Where administrators
are appointed in respect of a company and those administrators appoint
solicitors to advise and work for them as administrators, and those solicitors
are used to dispose of assets of the company, are their activities in doing so
properly said to be carried out on behalf of the company in administration? The
activities involved that are subject to a service provision change: are they to
be determined by the nature of the activity or the purpose of the activity
concerned? Thirdly, is the requirement of Regulation 3(3) of TUPE such
that it can be said that an administration which by statute is expected to be
completed within a year, and a further six months only at the outside and if
provided for by a court, a specific single event or task of short‑term
duration?
The facts
5.
The disposal of the service contracts that were of value, however,
continued. The evidence before the Tribunal as to that came from three sources
– Ms Boxford of Dentons, the Claimant, and the administrators in a public
document. The first said that effectively by summer (that is, therefore, after
some three months or so) the administrators were no longer trading JAS and that
transferees
ran the contracts under licence, so there was no work then to be
done in disposing of the contracts. In paragraph 40 the Tribunal record
that the Claimant gave evidence that there was still some work on disposals done
at least until October 2010. In paragraph 41 the Tribunal recorded
that the administrators said that JAS had traded until 3 July 2010
and thereafter trading had been under licence and they had been finalising
sales. The Tribunal never came to any factual conclusion as to when precisely
the work of disposing of service contracts finished.
The law
7. Regulation 3 of the TUPE Regulations 2006 provides, so far as is material:
“(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—
(i) activities cease to be carried out by a person (“a client”) on his own behalf and are carried out instead by another person on the client’s behalf (“a contractor”);
(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 its own behalf) and are carried out instead by another person (“a subsequent contractor”) on the client’s behalf; or
(iii) activities cease to be carried out by a contractor or a subsequent contractor on a client’s behalf (whether or not those activities had previously been carried out by the client on its own behalf) and are carried out instead by the client on his own behalf,
and in which the conditions set out in paragraph (3) are satisfied.”
8. Paragraph (3), which applies to (b)(i), (ii) and (iii), provides:
“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; and
(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.”
9. The parties have much in common in their argument. Thus they accept that the focus of a Tribunal must necessarily be upon “activities”; that is what is the subject of a service provision change. This Tribunal has observed before (see Kimberley Group Housing Ltd v Hambley [2008] IRLR 682) that the first question for the Tribunal is to identify the relevant activities or, as it may be, relevant activity. Secondly, the parties are agreed that the determination of what is an “activity” is a matter for the judgment of the Tribunal. It was said in Metropolitan Resources Ltd v Churchill Dulwich Ltd (In Liquidation) [2009] IRLR 700 case at paragraph 27 to involve essentially a question of fact in the application of the words of the provisions to any individual case.
The Employment Tribunal decision
“However whatever the purpose of these [activities] I cannot see
a practical difference: both [Dentons and the Claimant] were providing similar
legal services in disposing of JAS’s contracts, where the bulk of the work was,
as Mrs Boxford said, in dealing with negotiations to ensure that they did
transfer
their continuing contracts and that they were not terminated by the
client. To that extent it seems to me possible to split up the activities of
JAS which
transferred
to the administrators as agents for JAS (paragraph 68 of
schedule B1 of the Insolvency Act), and the legal work specific to
the administrators in their capacity as officers of the court. I do not see it
as a bar that the contract that the third respondent had with the
administrators was formally with the administrators, rather than with JAS, when
their contract was to do with administration work in which the administrators
were acting as agents for JAS. Stepping back from the legal formalities and
analysed in the round, DWS were providing legal services to JAS for the
administrators managing JAS. On that basis it was capable of being a service
provision change.”
11. At paragraph 65 the Tribunal returned to the theme of who was the client:
“The next point is whether the third respondent [Dentons] was providing legal services to the first and second respondent [Jarvis Group PLC and JAS] or to the administrators of the first and second respondent. That has already been discussed in answer to [other issues]. To the extent that there were specialised insolvency issues on which the administrators required advice, clearly the administrators would have had to outsource that whether to DWS or any other firm. In respect of disposals, that arguably is the work of JAS, which became the administrators’ work when they assumed responsibility for managing JAS on their appointment. By the end of their trading period, arguably there were no longer disposals to be done, though there might be some legal work still being done after the trading period to complete and finalise the disposals.”
“It seemed to me that it was quite possible to split up the provision of legal services to the administrators between the specialised insolvency work done for the administrators as officers of the court, and the practical work of disposing of JAS’s contracts which iwas [sic] part of the business of JAS, had in practice been their business up to the administration, and continued to be for some time thereafter. To that extent I find that the third respondent was providing legal services to the first and second respondent, even though their contract was with the administrators, who were acting as their agent.”
“67. The respondent points to the fact that the administration was contemplated to last no more than twelve months, and could have lasted less than that. In the event it lasted up to eighteen months, but it was always predicted to be, if not short term, at least a limited term event. I can see the attractions of the administration and the disposal of contracts being a limited piece of work and therefore capable of being a ‘single specific event or task of short term duration’. Twelve months may not be short‑term, but equally it cannot be said to be long‑term; it was at least envisaged to have a term.
68. An alternative is to analyse it like this: although the
administrators decided very promptly that JAS could not be carried on as a
going concern, at the time of appointment of administrators that was only one
possibility; although the administration itself would be of a limited term, the
task of providing legal services to JAS was one which was capable of
continuing. One of the possible outcomes of the administration was that JAS
would emerge from the administration in a healthier state and carry on business
once more, so while the administration was capable of being a ‘single specific
event or task of short term duration’, providing legal services for JAS was not
of short‑term duration, although that is what is proved to be [sic]. In
other words, the claimant, who had already been carrying out disposals, went on
carrying out disposals and presumably once all contracts had been disposed of
she would either follow them, if assigned to the contract, to the transferees,
or possibly she would face redundancy […].
69. In resolving the issue of whether, as the respondents argue, it was contemplated as a single specific event of short term, however long it took, but up to a year, for the administration, or whether I should take the claimant’s case that it was continuation of what she was already doing, it seems to me that insofar as the claimant was engaged on activities providing legal services to JAS, those activities could have continued after the end of administration and it was not at all clear this was in prospect a short‑term specific task (although in retrospect it was). […]”
14. The paragraph concludes with the words:
“I conclude that this was not caught by the exception of a
specific event of short term duration, and that the claimant’s activities did
transfer
to the third respondent.”
15.
I should add in respect of those last few words that the issue before
the Tribunal Judge was not whether the Claimant’s employment contract
transferred
but whether there had been a service provision change.
The appeal
16.
The three points that the Tribunal centrally decided were in issue as
grounds of appeal before this court. What was not in issue was that the mere
fact that one person, the Claimant, alone was providing the service to JAS of
disposing of service contracts meant that there was no organised grouping of employees;
it was accepted that it was possible for such an organised grouping of
employees to consist of a group of one. It was also accepted as the basis for
argument before the Tribunal that the Claimant had been employed by JAS, or at
least should be treated as employed by JAS, before any putative transfer.
This
therefore came within Regulation 3 as a service provision change under the
terms of 3(1)(b)(i), and it was unnecessary to consider (ii) or (iii).
18. The nature of administration in the context of TUPE had recently been the subject of a consideration by the Court of Appeal in Key2Law Surrey LLP v De’Antiquis [2011] EWCA Civ 1567, [2012] IRLR 212. In that case Rimer LJ set out in an extended review of the history of administration procedures the regime that now operated under the IA and the Schedule. He noted at paragraph 32 that whereas under the old regime there had been four purposes for whose achievement an administration order might be made, under the current regime paragraph 11 of Schedule B1 showed that there was but a single purpose of administration, although it comprised three objectives in respect of which there was a tiered priority:
“The overriding duty of an administrator is to perform his functions ‘in the interest of the company’s creditors as a whole’. In doing so, he must perform them with the objective of achieving the objective in paragraph 3(1)(a) (‘rescuing the company as a going concern’) unless, however, he thinks that it is not reasonably practicable for him to do so or that the objective of para. 3(1)(b) ‘would achieve a better result for the company’s creditors as a whole’. Paragraph 3(4) provides for the circumstances in which the administrator may perform his functions with the objective of para. 3(1)(c), an objective falling at the lower end of the hierarchy of priority.”
“As a general rule the Appeal Tribunal will follow its own decisions, particularly where they are considered decisions after argument on the point, and where there are no conflicting appellate decisions.”
23.
The second ground of appeal, however, does involve to some extent a
consideration of purpose where the definition of “activities” does not. The
wording of 3(b)(i) looks to activities, “that cease to be carried out by a
client on his own behalf”. Those last four words indicate something of
purpose, or, it may be better described, of relationship. The client is
plainly one and the same person as that expression is used throughout
Regulation 3. That was the conclusion to which this Tribunal, presided
over by Slade J, came in the case of Hunter v McCarrick
[2012] IRLR 274. There she concluded for the Tribunal that for there to be a
service provision change within the meaning of Regulation 3(1)(b), the
activities carried out by different contractors before and after the transfer
must be carried out for the same client. There was no warrant for adopting an
interpretation other than that required by the ordinary meaning of the language
used: “[…] the client in Regulation 3(b)(i) and (ii) refers back to a
specific client”. “There is no warrant”, she held, for giving the words “a
client” and “the client” different meanings in the different sub‑paragraphs
of Regulation 3(1)(b).
24. In this appeal, Mr Reade QC relies upon those observations; Mr Harris does not dispute them. Accordingly, the need, submitted Mr Reade, was to identify one client. He argued that taking into account the approach of the Court of Appeal in De’Antiquis and the IA 1986, Schedule B1, one would come inevitably to the conclusion expressed by Hildyard J in the case of Edenwest Ltd v CMS Cameron McKenna (a firm) [2012] EWHC 1258, a decision in the Chancery Division, where at paragraph 73 he said that:
“[…] ordinarily at least, an adviser instructed by receivers in their own name, whether before (when they have no choice) or after their appointment (when they could contract in the name of the company), will not, without more, be or become parties to a retainer with the company in receivership upon the appointment of such receivers as its agents.”
“[…] the statement that receivers […] acted as agents of the mortgagor company […] might suggest, at first blush, that everything a receiver does, he does on behalf of the company. That may be so in the ordinary course where the act involved is plainly on behalf of the company, as where an administrator instructs solicitors to act on behalf of the company in administration […]. But that is not so in every case. Receivers not only have other (non‑agency) powers; but also, the fact that they may contract as agent for the company does not mean that every contract made by a receiver is to be treated as a contract with the company. The question in every case is whether the specific contract was one that the receiver intended or must be taken to have made on behalf of the company or on his own behalf (albeit in the exercise of his receivership functions).”
“74. Putting it another way, bringing the company into a contractual relationship would require some specific act or instruction by its agent(s), and acceptance of the retainer by the adviser: it is not the automatic effect of the receiver or administrative receiver becoming an agent of the company.
75. If it were otherwise it seems to me that in every case where a solicitor’s firm is instructed by an administrative receiver who (in the ordinary way) is appointed as the company’s agent, the firm would be treated as retained by the company; and I cannot think that is right. It would, for example, make a nonsense of the clear legal distinction between the duties of a receiver and the duties of company management and require the solicitor to serve two masters (the mortgagee and the administrative receiver who owes his primary duty to it on the one hand, and the mortgagor company, on the other hand) who have, or may well have, different objectives.”
41.
I turn to the third argument, which is a further and separate ground for
allowing this appeal. It is that the Tribunal was in error in its approach to
determining whether Regulation 3(3)(a) was satisfied. It is not necessary
for me in approaching this to determine the interesting but somewhat
theological question of whether the draughtsman of the statute intended the
words “a single specific event” to be qualified by “of short‑term
duration” as well as the word “task”; that is a perfectly permissible way of
reading the sub‑paragraph, but so too is it on the face of it a
permissible reading to read “a single specific event” as standing on its own
and the words “of short‑term duration” to be linked to the word “task”
alone. If it were relevant to express a preference, mine would be for that advanced
by Mr Harris, which is that the “short‑term duration” covers both
events, and I would do so because it seemed to me that the point here is
essentially one of time and permanence. The context is employment; an
impermanent employment which is anticipated is unlikely to have the consequence
of the transfer
Regulations being applied, but a single specific event might be
of very considerable duration. It is possible to think of several such
examples.
43.
In case this particular point goes further, given the outstanding
appeals, I am told, in respect of both Hunter and De’Antiquis,
and, for that matter, the very recent currency of Edenwest, I
should perhaps say something of my conclusions. They are these, but
tentatively advanced for the reasons I have given. First, what is short‑term
or long‑term is inevitably a matter of perspective. Perspective depends
entirely upon the viewer. The view to be taken here in what is an avowedly
employment context is, it seems to me, that of the employee and not that of the
historian for whom short‑term duration may be a very much longer period.
It cannot be so short‑term as to suggest that it is of no great relevance
to consider whether there should be a transfer
under TUPE or not; that suggests
that a length of time of more than a few weeks will undoubtedly still be
capable of falling within “short‑term duration”. But it seems to me that
the broader context is that of employment relationships as a whole, in which
such guidelines, as they are, are that at the time that the Regulations were
made it would take a year for an employee to obtain employment rights other
than those in respect of automatic dismissals, but similarly an employee might
expect to receive at the most 12 weeks’ notice from his employer and could in
some circumstances give as little as 1 week to him. He would have three months
within which to appeal a finding of unfair dismissal.
45.
As to the wording, however, of the Regulation, it is this, in
combination with the way in which the Tribunal dealt with the issue, that seems
to me to give rise to an unanswerable case that the appeal must on this ground
be allowed. Whereas the textbooks appear to focus just upon the questions of
time – “single specific event” or “short‑term duration” – and the intriguing
but ultimately unhelpful question as to whether they are both or just one
governed by the words “short‑term duration”, it is to the wording of the
legislation that regard must be had. The paragraph begins not with a statement
that those changes, which will operate only in connection with a single
specific event or a task of short‑term duration are excluded, but that
that is the intention of the client. The governing words in paragraph 3(a)(ii)
are “the client intends”; therefore the primary finding of fact that the
Tribunal is called upon to make is as to the intention of the client. It may
often be, as Mr Harris submitted, self‑evident what the intention
will have been, but a Tribunal must, in my view, show that it recognises that
it is not dealing with an objective standard. It is dealing with the
anticipation or intention of the client; not the transferee, but the client.
“[…] it seems to me that insofar as the claimant was engaged on activities providing legal services to JAS, those activities could have continued after the end of administration and it was not at all clear this was in prospect a short‑term specific task […].”
Conclusion
Disposal