Appeal No. UKEAT/0392/09/DM

EMPLOYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 19 February 2010

Before

HIS HONOUR JUDGE SEROTA QC (SITTING ALONE)

DERRICK CYFFIN JONES T/A THE BARLEY MOW PUBLIC HOUSE (APPELLANT)

MISS D BEARDMORE (RESPONDENT)

Transcript of Proceedings

JUDGMENT

**APPEARANCES**

For the Appellant
No appearance or representation on behalf of the Appellant

For the Respondent
MR J G MERRY (Solicitor)

Messrs Lanyon Bowdler Solicitors
Brodie House
Town Centre
Telford
TF3 4DR

**SUMMARY**

TRANSFER OF UNDERTAKINGS

Transfer

Continuity of employment

PRACTICE AND PROCEDURE

Bias, misconduct and procedural irregularity

The Employment Tribunal held that there was a TUPE transfer when the Claimant, who was employed by a partnership of the Respondent and his father at their farm, began to work for the Respondent alone at his public house and brewery. The Employment Tribunal accepted that there was a transfer of employer but that the Claimant was an "economic entity" whose employment was therefore transferred. The fact that the Employment Tribunal was considering TUPE was not made known to the parties at the hearing as it had not been raised by the Claimant.

Appeal allowed 1) as no notice of the TUPE point was given and 2) the Claimant was incapable of being an 'economic entity' and there was no basis for finding a TUPE transfer.

**HIS HONOUR JUDGE SEROTA QC** **Introduction**

1. This is an appeal by the Respondent from a decision of the Employment Tribunal at Shrewsbury. Employment Judge Warren (sitting alone) found the Claimant was qualified to claim for unfair dismissal as a result of a TUPE transfer that had taken place on 4 July 2008. This appeal was referred for a full hearing by HHJ Ansell on 16 September 2009.

**The Facts**

1. The facts of this case are unfortunate and I take them from the Employment Tribunal. A farm outside Oswestry in Trefonnen was run by Mr Jones and his father in partnership. The Claimant had begun to work for the partnership in about 2000 and she worked part-time picking and grading eggs for which she was paid on an hourly basis. At all times from 2000 the Claimant only dealt with the Respondent, she did not deal with the Respondent's father, who, I believe, she referred to as granddad, and all her instructions came from the Respondent. In addition to his interest in the partnership at the farm, the Respondent also had his own business, a brewery (a small brewery, I assume) known as the Offa's Dyke Brewery, and a public house known as the Barley Mow Inn in Trefonnen.

1. Egg production at the farm reduced and in early 2008 the Claimant was offered other work to make up her earnings as a cleaner in the farmhouse where at that stage Mr Jones senior lived. She continued to be paid on a fortnightly basis through the partnership.

1. Mr Jones senior passed away in April 2008. The Claimant continued to clean the farmhouse but to supplement her income she was also offered work at the brewery and the public house. She continued, however, to be paid through the partnership which shared a wages clerk with the public house and brewery. The Employment Tribunal was not concerned and did now know how the accounts between the public house and brewery on the one hand and the partnership on the other were balanced and it made no findings.

1. On 25 May 2008 the Respondent offered the Claimant work in the public house and from 23 May to 3 July 2008 she worked in the brewery and public house. She also carried out cleaning work at the farmhouse and continued to collect and grade eggs.

1. Circumstances changed on or about 3 July 2008. The Claimant received a different payslip. She was now working full-time, essentially, in the public house and brewery and she was paid on a weekly basis and she was paid from the public house account. The Employment Tribunal was satisfied that her employer changed at that stage from the partnership to that of the Respondent.

1. The Claimant worked until early September when unfortunately she became ill with stress, and although Mr Jones paid sickness pay until January 2009 in January 2009 he could no longer afford to make these payments and the Claimant was dismissed.

1. It is important, I think, to recognise that at all material times the partnership business was separate to the public house/brewery business. I understand that sometime after January 2009 the affairs of the partnership were wound up and Mr Jones junior has now succeeded to his father's interest as well as his own in the partnership and the farm is now in his sole ownership.

1. The Claimant made her claim and immediately came up against the argument that she did not have sufficient continuity of employment because she had not been employed for a sufficient period by the Respondent at the time she presented her ET1. She also presented a claim for disability discrimination which the Employment Tribunal dismissed and I need say nothing more about that.

1. It is not clear to me what submissions were made to the Employment Tribunal, either by the Claimant, who was in person, or by the Respondent, who was represented by a solicitor. However, I am told by Mr Merry, who appears today on behalf of the Respondent (the Claimant unfortunately is unable to attend by reason of ill health and has not produced a skeleton argument), that at no stage did the Employment Judge suggest that this matter might be disposed of on the basis of a possible TUPE transfer.

1. The Employment Tribunal had this to say at paragraphs 13 and 14 and this is the nub of the Decision:

"13. The Claimant brings a claim for unfair dismissal and as such requires to have twelve months continuity of service. In relation to this the respondent argues that she only worked for him from 4 July 2008 to 3 January 2009 and is not, therefore, a qualifying employee. The Tribunal finds, however, that when her work began to move gradually from the farm and the partnership to the public house in May and June 2008 this was the start of a transfer of an economic entity by the partnership to the public house. This was instigated by Derek Cyffin Jones who was the sole manager of the partnership at that time and whom it suited to move the claimant as he was overstaffed at the farm and understaffed at the pub. Over that six week period the claimant as an economic entity [my underlining] was transferred. The effect of the transfer is that her contract of employment was not terminated with the partnership within Regulation 4 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 and that all of her rights transferred with her to Derek Cyffin Jones trading as the Barley Mow Public House.

14. The Tribunal has been influenced in reaching its conclusion by the following facts. The reality of the situation was that both businesses were being run by Derek Cyffin Jones. This was not a clean break where the Claimant ceased worked for one employer and began working for a second employer. Gradually her employment with Mr Jones moved into fields other than that for which she was originally employed, namely egg collecting. She started to clean the farmhouse and to undertake other work he asked her to do. She would not have known the situation with regard to the economic background of either the partnership of the farm or the public house and the brewery. All she knew was that she worked under Mr Jones' direction and went where she was told and when she was told and did the appropriate number of hours that she was told all by Mr Jones."

1. The Employment Judge went on to note that that from 25 May she continued to be paid in exactly the same way as she had before and it was only after the other work, that is, the work at the farm, dropped off that she started to be paid by cheque that appeared to come from a different account. She was paid by the same wages clerk, although she was now paid weekly, not fortnightly, and the Employment Judge described in the circumstances what appeared to have been:

"15. … a seamless transition of her working practice from the partnership through to the public house and as such it can be seen that the partnership actually transferred her as an economic entity to the public house. That being the case the claimant has continuity of employment from December 2000 to 3January 2009 and is a qualifying employee for the purposes of bringing her case."

1. The Decision of the Employment Judge that the Claimant, working as an egg picker and grader and cleaner of the farmhouse, constituted an economic entity when her employment transferred to the brewery and public house is quite startling. I shall turn to the correctness of this Decision shortly. I have little doubt that had this line of reasoning and the reference to TUPE been put by the Employment Judge to the solicitor appearing on behalf of the Respondent, he would have been persuaded that the application of TUPE to this particular situation was not possible.

1. There is no doubt in my mind that this Claimant has been treated most unfortunately. She had no reason to distinguish between the partnership on the one hand and the public house on the other; so far as she was concerned they all fell under the regime of Mr Derek Cyffin Jones. Had she had the benefit of legal advice or legal knowledge she might have asked when she was asked to transfer effectively full-time to working in the public house, "What about my continuity of employment?" But she had no such knowledge and she had no such advice and as a result the Respondent was able to argue that she lacked sufficient continuity of employment to bring a claim for unfair dismissal. Morality and ethical considerations, as Mr Merry correctly pointed out to me, have little to do with this question.

**The Legislation**

1. The first point that needs to be considered is whether the Decision of the Employment Tribunal could be regarded as fair to the Respondent. The Employment Tribunal decided this case on a basis that was never raised by the Claimant nor put to the Respondent's solicitor, as I have noted. Mr Merry has drawn my attention to the well-known case of Hereford and Worcester County Council v Neale [1986] IRLR 168 CA in which May LJ at paragraph 54 said:

"It would be unwise and potentially unfair for a Tribunal to rely upon matters which are clear to members of the Tribunal after the hearing and which have not been mentioned or treated as relevant without the party against whom the point is raised being given the opportunity to deal with it unless the Tribunal can be entirely sure that the point is so clear that the party could not make an useful comment in explanation."

1. I drew Mr Merry's attention to the Decision of the Court of Appeal in Stanley Cole (Wainfleet) Ltd v Sheridan [2003] ICR 1449 in that case. The Court of Appeal was considering the effect of the failure of the Employment Tribunal to draw to the Respondent's attention authorities which formed the basis of its refusal to review its earlier Decision, that the applicant had been constructively unfairly dismissed. In the circumstances of that case the failure did not amount to a breach of natural justice and the right to a fair hearing.

1. The headnote, from which I think one can sufficiently summarise the Decision, went on:

"In determining whether failure by a court or tribunal to alert the parties to a material, significant and relevant authority is such that an appeal on that ground should succeed, the question is whether what happened was seriously irregular and unfair. There is not a serious irregularity because a judge cites in his or her judgment decided cases which have not been referred to in the course of the hearing. Judicial research would be stultified if that were so and the parties had to be given the opportunity to address each and every case eventually set out in the judgment.

The authority must first be shown to be central to the decision not peripheral to it, it must play an influential part in shaping the judgment and authorities of little or no importance so as only to underline, amplify or give greater emphasis to a point that was explicitly or implicitly addressed in the course of the hearing then no complaint can be made, nor does it matter the authority was not mentioned if its point was so clear a party could not make any useful comment in explanation. The authority must alter the way the issues have been addressed to a significant extent so that it truly can be said by a fair-minded observer that the case was decided in a way which could not have been anticipated by a party fixed with such knowledge of the law and procedure that would be reasonable to attribute to him in all the circumstances.

However, where the boundaries of procedural irregularity lie or where the principle of natural justice ought to apply or what makes a hearing unfair depends on the subject matter and the facts and circumstances of each case so that this is not intended to be an all-encompassing test. After establishing the centrality of the decided authority to the decision in question, it must also be shown that a material injustice as a result of the hearing will not have been unfair if it has caused no substantial prejudice to the party claiming to be agreed, the vital question is whether it would have made any difference to the outcome if the party had been armed with the authority."

1. So far as concerns the present case, I have no doubt that the failure of the Employment Tribunal to notify the parties that it was considering making a finding that the Claimant's service was continuous by virtue of a TUPE transfer led to a serious and material breach of fairness. For that reason alone, as it seems to me, the Decision of the Employment Tribunal cannot stand. However, I do not think that the matter can simply rest there because it might necessitate remitting the matter for further consideration by the Employment Tribunal. I am quite satisfied, however, that on any showing the Claimant could not possibly show that she was an economic entity and that there had been a TUPE transfer.

1. The decisions of the European Court of Justice on the Acquired Rights Directive are not always easy to reconcile. However, as Mr Merry has pointed out, the Decision in the case of

**Spijkers v Gebroeders Benedik Abattoir** **CV et Alfred Benedik** **en Zonen BV** **[**1986**]** ECR 1119 makes clear that a transfer in order to attract the protection offered by the Directive requires as a decisive criteria that the business in question retains its identity. The fact that it is operational and is actually continued or resumed by the new employer with the same or similar activities is, of course, important.

1. I think, however, it is most helpful simply to look at the regulations, the Transfer of Undertakings (Protection of Employment) Regulations 2006. Regulation 3 makes clear that the regulations apply to the transfer of an undertaking or business or part of an undertaking or business situated immediately before the transfer in the United Kingdom from another person where there is a transfer of an economic entity which retains its identity. Regulation 3(2) defines "economic entity" as meaning an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary. The failure of the Employment Judge to refer to the possibility that he was considering the application of TUPE closely resembles a failure to refer to an authority, central to the decision, which altered the basis upon which the case was apparently argued and could not have been anticipated.

**Conclusion**

1. I do not see how it can possibly be argued that the Claimant herself could be regarded as an economic entity. She was employed offering her own services but was employed by the partnership doing work in and around the farm and the farmhouse. The activities which she conducted were not transferred, she was offered, and took up a different job with a different employer. That is the legal effect although it may not have seemed at the time to her or, indeed, to the Respondent that this was the case.

1. In those circumstances it seems to me that were I to remit this matter to the Employment Tribunal it would be bound to find that there had been no TUPE transfer; it would be bound to find that the Claimant could not properly be regarded as an economic entity and in those circumstances, notwithstanding what I would regard as a valiant attempt by the Employment Judge to provide some compensation for the Respondent; as a matter of law she has failed to show that there was any continuity of employment and she lacked sufficient qualifying employment to enable her to bring her claim for unfair dismissal. In those circumstances the appeal is allowed.