The claims arose out of negotiations concerning the transfer complaints handling against solicitors from the Law Society's Legal Complaints Service to the new Office for Legal Complaints set up under the Legal Services Act 2007. In tripartite negotiations between the MoJ, Law Society and OLC it was at first common ground that TUPE did not apply and an agreement was negotiated whereby the OLC would interview LCS employees and give preferential treatment to them but there was no right in law to transfer staff to the new body. The OLC made it clear through these negotiations that they should not be seen as simply "rebadging" the existing structures, as this was an entirely new approach. Before the agreement was formally accepted, the Law Society changed their stance, saying that the Henke exception might not apply in which case a Cabinet Office Statement on transfer might also do so and seeking explanation of any TUPE principles that might apply. The Justice Minister replied disagreeing with their stance so these proceedings were instigated.

Akenhead J identified three questions that need to be considered. In summary i) is there a transfer of an economic entity for the purposes of Reg 3 of TUPE? ii) if there is a transfer was it that of administrative functions between public bodies so as to prevent it being a transfer for the purposes of Reg 3(5) of TUPE? iii) did the relevant Cabinet Statement (COSOP) on these issues affect the outcome and should he make declaration to that effect as sought? On

i) he reviews the relevant domestic and European jurisprudence and compares the procedures and roles of the two organisations. He cautions "against jumping to the conclusion that the mere fact that the service provided by the old and new undertaking is similar does not justify the conclusion that there has been a transfer of an economic entity" and notes that "apart from any employees who are or may be taken on by OLC, there is nothing which is in any normal sense going to be transferred by LCS to OLC". He then concludes that there is no transfer of an economic activity for TUPE purposes

ii) though not required to do so in the light of i) he reviews the application of Henke to the case and the Lords decision in Institute of Chartered Accountants v Commissioners for Customs & Excise. He then sets out several reasons why he concludes that Reg 39(5) "bites" in this case as  OLC is statutorily to assume these functions

iii) he points out COSOP is not binding and declines to make definitive interpretation or declaration as he could not do so with out further evidence. However, among other reasons, on the wording he doubts that the statement was ever intended to apply to the LCS/OLC functions and it was difficult to say that the minister or OLC had done anything unlawful or Wednesbury unreasonable.

_______

Case No: HQ09X05648
Neutral Citation Number: [2010] EWHC 352 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 26th February 2010

Before :

MR JUSTICE AKENHEAD

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Between :

**THE LAW SOCIETY OF ENGLAND AND WALES (Claimant)

• and -**

(1)THE SECRETARY OF STATE FOR JUSTICE; (2) THE OFFICE FOR LEGAL COMPLAINTS (Defendants)

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Andrew Stafford QC and Matthew Sheridan (instructed by Hill Dickinson LLP) for the Claimant
Paul Rose QC and Paul Nicholls (instructed by the Treasury Solicitor) for the First Defendant
Christopher Jeans QC and Holly Stout (instructed by Lawrence Graham LLP) for the Second Defendant

Hearing dates: 14, 15 and 16 February 2010

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JUDGMENT

**Mr Justice Akenhead: 
Introduction
**1. The Legal Services Act 2007 (the "2007 Act") introduced wide ranging changes, amongst other things, in relation to the way in which complaints made against members of the different legal professions and institutions are to be brought by the consumers of their different services. Whilst disciplinary matters will broadly be left to the individual constituent elements of the different bodies which regulate the members of those professions and institutions, a new Office for Legal Complaints ("OLC"), the Second Defendant in these proceedings, has been set up to deal with such complaints, albeit that it is not yet functioning in its capacity of receiving and addressing complaints. Once OLC is dealing with complaints, the bodies set up historically by the different legal professions and institutions will cease to function other than for purposes of dealing with complaints which had already been lodged with them before a cut-off date which has not yet been fixed but which is expected to be later in 2010. The Legal Complaints Service ("LCS") was the final successor body set up by the Law Society of England and Wales ("the Law Society"), the Claimant, to deal with complaints about the quality of professional services. As the largest legal profession in England and Wales, with independent and employed solicitors currently over 130,000, solicitors in numerical terms attract the largest number of complaints (whether those complaints are justified or not) and it is likely that OLC, when it is up and running, will numerically be dealing largely with such complaints; it is estimated that 90% approximately of the complaints will relate to solicitors.

1. The Transfer of Undertakings (Protection of Employment) Regulations 2006 (the "TUPE" Regulations) are the latest version of statutory requirements which govern provisions for the protection of employees in undertakings or businesses which are transferred elsewhere. They reflect to a large extent European Community law and practice.

1. This claim, brought by the Law Society against the Secretary of State for Justice representing the Ministry of Justice ("MoJ"), the First Defendant, and OLC, seeks clarification in relation to the employment position of its employees within LCS and in particular whether their employment is to be or is to be considered to be transferred or transferable to OLC. The Law Society, apart from any contentions relating to the specific applicability of the TUPE Regulations, seeks also to argue that the effect of a Cabinet Office paper entitled "Staff Transfers in the Public Sector Statement of Practice" ("COSOP") materially impacts upon LCS staff and MoJ.

**The TUPE Regulations
**4. The most relevant provision is Regulation 3, the material parts of which are:

"3. (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;…

(2) In this regulation "economic entity" means an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary…

(4) Subject to paragraph (1), these Regulations apply to

(a) public and private undertakings engaged in economic activities whether or not they are operating for gain;…

(5) An administrative reorganisation of public administrative authorities or the transfer of administrative functions between public administrative authorities is not a relevant transfer.

(6) A relevant transfer—

(a) may be effected by a series of two or more transactions; and

(b) may take place whether or not any property is transferred to the transferee by the transferor."

5.Regulation 4 addresses the effect of any applicable transfer:

1. (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…

(4) Subject to regulation 9, in respect of a contract of employment that is, or will be, transferred by paragraph (1), any purported variation of the contract shall be void if the sole or principal reason for the variation is—

(a) the transfer itself; or

(b) a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce…

(5) Paragraph (4) shall not prevent the employer and his employee, whose contract of employment is, or will be, transferred by paragraph (1), from agreeing a variation of that contract if the sole or principal reason for the variation is—

(a) a reason connected with the transfer that is an economic, technical or organisational reason entailing changes in the workforce; or

(b) a reason unconnected with the transfer.

(7) Paragraphs (1) and (2) shall not operate to transfer the contract of employment and the rights, powers, duties and liabilities under or in connection with it of an employee who informs the transferor or the transferee that he objects to becoming employed by the transferee.

(8) Subject to paragraphs (9) and (11), 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.

(9) Subject to regulation 9, where a relevant transfer involves or would involve a substantial change in working conditions to the material detriment of a person whose contract of employment is or would be transferred under paragraph (1), such an employee may treat the contract of employment as having been terminated, and the employee shall be treated for any purpose as having been dismissed by the employer.

(10) No damages shall be payable by an employer as a result of a dismissal falling within paragraph (9) in respect of any failure by the employer to pay wages to an employee in respect of a notice period which the employee has failed to work.

(11) Paragraphs (1), (7), (8) and (9) are without prejudice to any right of an employee arising apart from these Regulations to terminate his contract of employment without notice in acceptance of a repudiatory breach of contract by his employer."

**The Law Society
**6.The Law Society came into being by way of Royal Charter in 1845 and is essentially responsible for the regulation of solicitors. It derives its powers and duties under a number of Acts of Parliament including the Solicitors Act 1974 (the "1974 Act"), the Courts and Legal Services Act 1990, the Access to Justice Act 1999 and the 2007 Act. So far as is material to this case, the Law Society's duties and powers are:

(a) keeping the Solicitors' roll and striking off and suspending solicitors;

(b) attending to the registration of applications for practising certificates;

(c) making rules which affect and bind solicitors;

(d) intervening, as necessary, in solicitors' practices;

(e) allowing payments from the compensation fund;

(f) making rules about indemnity;

(g) making applications to the Solicitor's Disciplinary Tribunal;

(h) affording redress for professional services "which are not of the quality which it is reasonable to expect of them" as solicitors;

(i) examining solicitors files, for instance when investigating professional misconduct by a solicitor or whether any professional services are not of the quality reasonable to expect of solicitors;

(j) requiring a solicitor to attend to explain information or documents provided within such files;

(k) ordering a solicitor to pay costs of investigation.

1. It can thus be seen that, within the Law Society's regulatory functions, there is a distinction between those involved with disciplining solicitors in effect for various types of misconduct and those providing redress with regard to professional services "which are not of the quality which it is reasonable to expect of them"; this quotation is taken from Paragraph 1(1) of Schedule 1A of the 1974 Act as amended. It is this latter function which is, broadly, exercised by LCS.

**The LCS
**8. LCS essentially deals with consumer complaints made against solicitors or solicitors' firms.  It is to be contrasted with what is now called the Solicitors Regulation Authority ("SRA") which deals with disciplinary issues. Historically there had been the Solicitors' Complaints Bureau which had then become the Office for the Supervision of Solicitors which in 2002 had been split between the Compliance Directorate (dealing with disciplinary matters) and the Consumer Complaints Directorate (subsequently the Consumer Complaints Service) (dealing with consumer complaints). In about 2006, these were reconstituted as the SRA and LCS.

1. Necessarily and unsurprisingly, the nature and scope of the types of complaints which can be and are made to LCS are both varied and broad. There are and have been however at least two material constraints in practice in relation to what LCS can or will deal with. If the complaint raises matters which should be dealt with by the SRA, the complainant will be referred to the SRA and the complainant will not be dealt with by LCS unless it also involves inadequate professional service. Similarly, if the complaint in substance raises issues against other professionals, in particular (but not exclusively) independent barristers, the complaint, at least to that extent, will not be entertained. There are, currently, about 106,000 contacts a year by customers of which some 14,000 to 15,000 emerge as actual complaints. The maximum compensation which the LCS can currently award is £15,000.

1. Although all the employees of LCS are employed by the Law Society, it has its own Chief Executive Officer (Ms Evans) and, currently, some 345 staff permanently assigned to it. It has its own offices, (although owned or leased by the Law Society) with its main office based in Leamington Spa and a small office in the Law Society's main office in Chancery Lane in London. It has its own website, e-mail addresses, logo and notepaper. It has its own business plan and proposes its own budget, which once approved by the Law Society Council it can spend without interference. It has its own Board which meets monthly. It has its own accounts reported separately in the Law Society's Annual Report on Accounts. LCS is consulted separately by third parties from time to time. LCS is subject to scrutiny by the Law Society Audit Committee. Certain support services continue to be provided by the Law Society on a shared basis, such as IT, finance systems, Human Resources and facilities support

1. In general terms, complaints are handled by LCS as follows:

(a) The complainant makes contact with LCS.

(b) LCS staff assess the complaint to see that it falls within LCS' jurisdiction.

(c) The complaint is allocated to an appropriate individual or individuals who attempt to resolve the complaint.

(d) The solicitor or solicitors' firm will be contacted.

(e) Efforts will be made to resolve the complaint informally.

(f) Failing informal resolution, complaints are formally investigated followed by adjudication by an LCS adjudicator.

LCS has 4 Complaint Units, namely the Customer Contact Centre and Complaints Centres 1, 2 and 3.

1. LCS's policy is that generally complaints should not be accepted until after the relevant solicitor's own complaints procedure has been followed. Normally complaints which are not brought within six months after the relevant solicitor completes the work or six months after the client discovers that there was a problem in that work will not be accepted for resolution. Complaints which are in effect purely about professional misconduct will not be accepted for consideration. There is similarly a reluctance (at least) to address complaints said to involve professional negligence albeit that the inclusion of such complaints is not necessarily a bar to the complaint being processed. Once the Customer Contact Centre has designated or allocated complaints, complaints will go to different complaint centres. Whilst all of the Complaints Centres can deal with all types of complaint, Complaints Centre 2 has four case working teams which deal with special types of complaints: the Legal Services Ombudsman's Team (dealing with recommendations from the Ombudsman for closed cases to be reassessed or reconsidered), the Coal Health Team (dealing with complaints in this area), the Immigration Team and the Parliamentary and Discrimination Team (where an MP has been involved or where there has been alleged discrimination). LCS does when necessary "outsource" some complaints handling to solicitors who are approved to do this. There are seven adjudicators all of whom are solicitors.

1. It is open to complainants, if they feel that the process applied by LCS to their complaints has been unsatisfactory, to refer matters to the Legal Services Ombudsman. It is similarly open to complainants to apply to the Court for judicial review in relation to aspects of the complaints handling service.

1. The LCS does not as such enforce decisions or awards of its adjudicators . If a decision is made that a solicitor is to pay some compensation to a complainant and the solicitor does not honour that decision, the matter can be referred to the SRA on the basis that there has been misconduct in the solicitor not doing so.

**The Clementi Report
**15. There was widespread concern about the complaints handling jurisdictions and process across the legal system, primarily related to complaints against solicitors and barristers although other bodies were involved (the Institute of Legal Executives, the Institute of Trade Mark Attorneys, the Council for Licensed Conveyancers, the Chartered Institute of Patent Attorneys, the Association of Cost Draftsmen and the Master of Faculties). Sir David Clementi was asked to investigate and report on this state of affairs and make appropriate recommendations. His December 2004 "Review of the Regulatory Framework for Legal Services in England and Wales" identified his Terms of Reference:

"To consider what regulatory framework would best promote competition, innovation and the public and consumer interest in an efficient, effective and independent legal sector.

To recommend a framework which will be independent in representing the public and consumer interest, comprehensive, accountable, insistent, flexible, transparent, and no more restrictive or burdensome than is clearly justified."

16.In the Forward to his Review, at Paragraph 3, he refers to his earlier Consultation Paper:

"That paper raised a number of questions, and behind it lay three particular concerns:

(i) any concern about the current regulatory framework In its report published in July 2003 entitled ' Competition and regulation in the legal services market' that Department for Constitutional Affairs concluded that the current regulatory framework was "outdated, inflexible, over-complex and insufficiently accountable or transparent". Nothing that I learned during the 18 month period of my Review has caused me to doubt the broad validity of the Government's conclusion. The current system is flawed. In part the failings arise because the governance structures of the main front line professional bodies are inappropriate for the regulatory tasks they face. A further cause is the over-complex and inconsistent system oversight regulatory arrangements of existing front-line regulatory bodies: the Law Society is overseen in many of its functions by the Master of the Rolls…There are no clear objectives and principles which underlie this regulatory system; and the system has insufficient regard to the interests of consumers. The complexity and lack of consistency has caused some to refer to the current system as a maze.

(ii) any concern about current complaints systems There is considerable concern about how consumer complaints are dealt with. The concern arises at a number of levels: at an operating level, there is an issue about the efficiency with which the systems are run; at an oversight level, there is a concern about the overlapping powers of the oversight bodies; and at a level of principle, there is an issue about whether systems for complaints against lawyers, run by lawyers themselves, can achieve consumer confidence. A large number of the responses to the Consultation Paper expressed dissatisfaction with the current arrangements.

(iii) a concern about the restrictive nature of the current business structures: the business structures through which legal services are delivered to the public have changed little over a considerable period. The most easily recognisable structure is the high-street solicitor, practising either on his own or in partnership with other solicitors. Business practices have changed. In particular the skills necessary to run a modern legal practice have developed; and whilst those with finance or IT skills may sit on the management committee of the legal firm, they are not permitted to be principals in the business. There is concern also about whether the restrictive practices of the main legal professional bodies can still be justified, in particular those which prevent different types of lawyers working together on an equal footing. There is pressure to change from those who represent consumer interests, but also from many in the legal profession, particularly the Law Society who had made a strong case for the liberalisation of law practices."

1. In Chapter C of this Review, Sir David Clementi addressed "Complaints and Discipline". He was of course considering the Consumer Complaints Service which was a predecessor of the LCS and necessarily his comments were not made in relation to the LCS as it has metamorphosed since the time of this Review. He referred to the fact that the record of complaints handling against solicitors had been the subject of much criticism over recent years (Paragraph 17), although there had been some improvement. He referred to responses to the Consultation Paper that consumer confidence in lawyers' ability to deal with complaints against their fellow professionals had been irreversibly undermined (Paragraph 24) and that the lack of independence added to the feeling held by many consumers that they were at a particular disadvantage in raising a complaint against a lawyer (Paragraph 25); he expressed the view that the Law Society's Consumer Complaints Service "was no more independent than its predecessor…and unlikely to command any greater public confidence in the independence of its decisions" (Paragraph 26). He did not believe "that the current system delivers sufficient independence from the legal practitioner" (Paragraph 33). He concluded at Paragraph 37:

"… that a single independent complaints handling body for all consumer complaints is the best way forward. It would sweep up the complaints handling units of the front-line bodies and the main oversight bodies. Such an arrangement would have the benefit of:-

providing a system which is independent of the legal profession;

providing a single system with one point of entry for all consumer complaints, making the system simpler to consumers;

bringing greater consistency and clarity of process; and

bringing greater flexibility, in particular making it easier to accommodate alternative business structures.

It would also enable the collection and data which could be used as a valuable source of information on which to make informed decisions about where to target efforts to improve service delivery across front-line bodies."

He referred to this body, provisionally but perhaps percipiently, as OLC.

1. He said at Paragraph 49 that the "aim of the OLC should be to provide quick and fair redress to consumers in whatever form may be appropriate" and that OLC should first attempt to mediate the complaint. He said at Paragraph 50 that "OLC will determine complaints by reference to what is, in its opinion, fair and reasonable in all the circumstances of the case." He made it clear however, that in effect the existing disciplinary arrangements within, for instance, the Law Society, should remain in place within such front line regulatory bodies.

1. It was this report that then led to the 2007 Act.

**The 2007 Act
**20. The Parliamentary background to the Act was related to the Clementi review. In promoting the bill on its second reading, the Minister's (Ms Bridget Prentice's) introductory remarks were to the effect that the bill "above all…[put] consumer interests at the heart of legal services provision". She went on:

"For too long, regulation and legal services focused on the suppliers of those services at the expense of the consumer. It has been a consistent message from consumers, who have told us loud and clear-as, indeed, did Sir David Clementi-that their needs are simply not being met. In particular, they told us that they were not satisfied with the way that legal services were delivered, as the focus was on what suited the provider as opposed to the consumer; that they had lost confidence in self regulation alone; and that their experiences of poor complaints handling had undermined their confidence in the system as a whole."

She made a number of other references to Sir David Clementi and his work commending his report as excellent and said that the Government had broadly accepted his recommendations. It is clear that generally the bill was welcomed by Parliament. During discussions about amendments, the question of whether the new OLC might be housed at LCS's premises at Leamington Spa was raised; the Minister unequivocally made it clear that that location "would not be considered" and that the setting up of OLC should not be "a re-badging of Leamington Spa" because that "would greatly undermine some of the thrust of the Bill". There are numerous references in the debates and those in the House of Commons and in the House of Lords to the interests of consumers being put first.

1. The 2007 Act received the Royal Assent on 30 October of that year. Amongst other things, this Act set up OLC as a body corporate (Section 114) which was required to operate what was termed the "ombudsman scheme" (Section 115). Section 116 set down its general obligations:

"(1) In discharging its functions the OLC must comply with the requirements of this section.

(2) The OLC must, so far as is reasonably practicable, act in a way

(a) which is compatible with the regulatory objectives, and

(b) which it considers most appropriate for the purpose of meeting those objectives.

(3) The OLC must have regard to any principles appearing to it to represent the best practice of those who administer ombudsman schemes."

Those "regulatory objectives" were defined in Section 1 of the 2007 Act:

"(1) In this Act a reference to "the regulatory objectives" is a reference to the objectives of—

(a) protecting and promoting the public interest;

(b) supporting the constitutional principle of the rule of law;

(c) improving access to justice;

(d) protecting and promoting the interests of consumers;

(e) promoting competition in the provision of services within subsection (2);

(f) encouraging an independent, strong, diverse and effective legal profession;

(g) increasing public understanding of the citizen's legal rights and duties;

(h) promoting and maintaining adherence to the professional principles."

1. It is of some background relevance that OLC will be funded by a levy on the legal professions concerned. Thus as the largest legal profession, it is estimated that the Law Society will pay 90% and possibly more of the OLC's costs after case charges are accounted for. I will return to the powers and duties of OLC later in this judgement.

**The Factual Background to this Dispute
**23. Prior to the 2007 Act becoming law, Ms Prentice had written to the Law Society on 14 December 2005 saying that in setting up the OLC "the principles of TUPE will apply to the transfer of staff".

1. The OLC was established as a statutory corporation on 7 March 2008 and became partly operational on 1 July 2009 although beforehand various people, including Mr Adam Sampson, were in place. Mr Sampson has been the Chief Ombudsman and Chief Executive of OLC since March 2009. It has established its offices in Birmingham. A number of senior posts have already been filled apart from Mr Sampson's such as the Heads of Human Resources Management and of External Affairs and the OLC Board Secretary; the Deputy Chief Ombudsman and five other ombudsman positions have been offered with the people taking up their posts in the very near future. Directors of Finance and Business Services and of Operations are due to take up their posts soon. The OLC is intending, all things being equal, to complete its recruitment over the coming months (subject to the outcome of this case) so that it will be in a position to receive and process complaints in the last few months of 2010.

1. LCS produced its 2009-10 Plan in early 2009, albeit various revisions have been made; it recognised that 2009 was "likely to be the final full year of operation" for LCS. At page 7 said:

"At the same time, we are starting to see the reforms of the Legal Services Act 2007 come to light, creating a new regulatory landscape for legal services. The incoming OLC will significantly change how redress is provided to consumers of legal services. It also represents a big change for LCS, both for our customers and our staff. This new organisation will require time to set its direction and put in place its architecture."

At page 7 under the heading "Staffing", this was stated:

"Our HR [Human Resources] service is provided centrally from TLS [the Law Society]. We have a responsibility to work with TLS to manage, inform and support our staff through the many changes involved with closure and handover, including the application of TUPE-style arrangements…"

1. On 24 April 2009, the Law Society wrote to Ms Prentice in these terms:

"As you will recall, the Law Society supported the provisions in the Legal Services Act dealing with the establishment of the Office for Legal Complaints. We recognise that it is necessary to establish a body to dealing with consumer complaints about lawyers which is wholly independent of all the professional bodies in order to maximise consumer confidence in the system.

The Law Society also strongly supported your undertaking that TUPE principles would be applied to the staff of the Legal Complaints Service in relation to posts in the Office for Legal Complaints. We believe that undertaking was important both in order to maximise the retention of LCS staff prior to the establishment of OLC-thus helping to ensure that a good service to complainants is maintained-and to enable the O LC to benefit from staff with sound knowledge of the issues tending to arise in consumer complaints about legal services.

We are concerned, however, that your commitment will not be effective unless it is underpinned by a statutory instrument made under section 38 of the Employment Relations Act. Without such an order, it will be impossible as a matter of law to ensure that the normal incidents of a TUPE transfer apply in this situation…"

The provisions of the Employment Relations Act would enable a TUPE transfer to take place by way of a specific statutory instrument.

1. OLC opposed this suggestion and wrote to the Parliamentary Under Secretary of State on 19 May 2009 following a meeting:

"…one of the key objectives of Parliament was to re-establish a new organisation with a different approach, where independence is paramount. That, we understand, is why the legislation is clear that the alternative dispute resolution scheme to be set up must be an Ombudsman service. The Board is mindful of this history and is concerned to ensure no possible perception of a re-badging of earlier arrangements. I know from our meeting that you share that concern.

We must therefore open our doors in 2010 as a new and different service. We do not intend, as I explained, to take on any work in progress. In this regard the Board agreed that we should stress to you the importance of the OLC having the maximum flexibility in determining the skills and the individuals who will work with us, and ask you to keep this in mind when considering the requirements that will be placed on us if a s38 Order under TUPE were made. We do appreciate that this is not a straightforward matter. There will be many individuals whose experience and skills we shall want to use but to select them against our own criteria of the jobs we have described and salaries/benefits we have determined that the new organisation would, we believe, give us the best start."

Thus, it is clear that OLC was against the idea of any statutory TUPE transfer.

1. Ms Prentice replied in June 2009 averting to the fact that the Law Society and OLC had "very different views". She went on:

"Therefore, it is important that you work together to reach an agreed solution to the staffing issue and the related question of handling the cases that are still in the system at the point that the OLC goes live, to ensure that consumers experience no adverse customer service during this period. However, I consider it crucial that MoJ officials are involved in any discussions on this issue as I will reserve the option of making a section 38 order if it does not prove possible to negotiate a workable solution. In addition, there may be significant financial implications on my Department, and I wish [to] have direct reassurance that services to consumers are subject to no reduction in quality.

I would, therefore, urge you to start these tripartite discussions as soon as possible. I will be seeking regular updates on my officials about the progress of the negotiations."

Thus, her stance was that the three sides should negotiate a workable solution.

1. There were a number of meetings between August and November 2009 attended, usually, by two representatives each from the Ministry of Justice, the Law Society and OLC. I received evidence from one representative of each, Dr Gibby, Mr Hudson and Mr Sampson respectively. It is clear that the Law Society took the conscious decision that LCS would not only not participate in these discussions but also not be informed of their content; it does seem at least possible that some "leakage" occurred however, although nothing turns on that. The first meeting took place on 13 August 2009 and the agreed note identified that the parties agreed basic principles as shared objectives:

"Ensuring that consumers continue to receive a higher standard of service in the handling of complaints during the transition from the old complaints system the new system;

Ensuring that the best interests of staff are realised in these plans; and

Ensuring costs are kept to a minimum for the benefit of both the legal profession and the public purse."

1. Amongst other things noted at this meeting was that the parties would be seeking legal advice as to whether the TUPE regulations applied in relation to the OLC. This is reflected in the agreed (or at least unchallenged) note of the next meeting held on 10 September 2009:

"The legal advice received independently by the OLC, Law Society and MoJ came to the same conclusion that TUPE did not apply. The conclusion of the advice was caveated with the statement that those consulted could not be 100% certain. It was agreed that, although the risk of challenge by individuals was low, it was of high importance that all acted to mitigate the risk of challenge. It was discussed that individuals could take any action through their Union, but that such a challenge would, on the balance of probabilities, be unsuccessful…"

Without any party revealing the details of any legal advice which it had received, it was accepted at the very least that the Law Society had been advised that probably TUPE did not apply. The following was also noted:

"The following was agreed:

80-100 LCS staff may move across to the OLC. The staff would need to meet the skills set required for a move to occur. They would move on OLC Terms and Conditions, supported by a transition payment or other options. This would be offered alongside the job fairs and supporting actions for remaining staff, providing the option of seeking alternative employment, or applying to advertise jobs within the OLC, as proposed in Adam's paper…

There will need to be co-ordinated communication covering the position that TUPE does not apply, the proposed approach for 80 to 100 staff, support for staff in general and lines for the Minister…"

1. Thus it was that over the next 2 to 3 months all parties proceeded upon the basis that the TUPE Regulations would not and did not apply to the establishment of OLC and the cessation of LCS. There were other related discussions about the transition stage or phase. In a response document dated 22 October 2009, Mr Hudson sought to secure the position that those LCS staff who wished to apply for jobs within the OLC should have some preference over others:

"In terms of the proposed approach, we agreed that the OLC should see the best possible employees for the roles within the organisation. The determination of a credible bar for employability by means of skill matrices and the use of assessment centres seems an appropriate and sensible approach…

We do have some concerns about the process for "road testing" the assessment criteria and determining the employability bar. It would be helpful to have more details on your proposed process. We would also need our employees to be assured that none of the available posts will be offered to external candidates involved in the employability benchmarking exercise prior to completion of the assessment process for LCS employees. We believe it would be appropriate for OLC to provide such an assurance in writing.

It would then follow that LCS employees would be offered the new roles provided they were successful at the assessment centre and met the employability bar determined by the benchmarking exercise will stop only then, would any jobs which remained unfilled be open to external market candidates.

Whilst the assessment process you outline relates to complaints handling roles only, we believe that substantially all LCS functions will transfer to the OLC, even though the OLC has a slightly different jurisdiction. Consequently, in fairness to those employees in non-complaints handling roles we see no reason why LCS employees cannot be given preference, in the sense of being appointed if they meet the required standard, with external candidates only been sought if unfilled remain."

This discussion was obviously proceeding on the basis that TUPE did not apply and that those LCS employees who were interested in moving to OLC would apply for the jobs in question and be offered them in preference to outside applicants if they met the requisite criteria.

1. Matters proceeded apace and draft heads of agreement were discussed and to a very substantial extent at least, agreed. By 25 November 2009, Mr Hudson of the Law Society wrote to Mr Sampson at OLC, returning a track changed heads of agreement document. The whole agreement is predicated upon the context that "it is likely that TUPE does not apply in law" and that all parties recognise therefore "that LCS employees will not, in law, have a right to transfer to OLC and that, in addition, there are likely to be differences in terms and conditions of employment." So far as staffing was concerned, it was provisionally accepted that all recruitment to be undertaken by OLC was to be "by a process of competitive selection against a published market norm" (albeit that norm had not been finally agreed), but it would be based "on assessment processes using clear and transparent criteria previously agreed", that save for senior management posts, "LCS applicants…will be offered employment in the available posts, subject to meeting the standard required on the terms of employment adopted by the OLC…" and that "no post will be offered to an individual not working for an existing complaints handler unless or until those within the OLC remained vacant after processing or applicants from existing complaints handling employees".

1. By 10 am on Thursday 30 November 2009, Mr Hudson for and on behalf of the Law Society produced what was to be, apparently, the final version of the draft agreement which was to be submitted to the Minister. Again the context was that it was "likely that TUPE does not apply in law" and was predicated upon the basis that LCS staff, who so wished, would apply for jobs at OLC. The draft agreement covered the closing down of the LCS and the opening of the OLC Ombudsman scheme. The principles to be adopted in the recruitment of staff to the OLC were set out:

"All recruitment undertaken by the OLC will be by a process of selection against a published market norm.

All recruitment will be based on assessment processes using clear and transparent criteria about which the TLS have been consulted in advance.

Save in relation to senior management posts, applicants from LCS…will be offered employment in the available posts, subject to meeting the standard required on the terms of employment adopted by the OLC.

No post will be offered to an individual not working for an existing complaints handler unless or until posts within the OLC remain vacant after processing of applicants from existing complaints handling employees;

Compliance with this approach will be confirmed by audit;

TLS will provide at its cost specific support for employees working within LCS such as assistance in preparing for assessment centres, CV preparation, interview techniques support etc;

Subject to employees not being subject to disciplinary or performance action with their existing employer prior to them taking up employment with the OLC, where staff join OLC from existing entities the OLC will treat their employment as being continuous for the purposes of contractual entitlement".

Provision was made for Law Society employees who secured employment with OLC but whose base pay was less than their current base pay that the Law Society would pay the difference in the first year.

1. Mr Sampson was sent and received the draft and indicated that he would sign it in its current form. In his e-mail at 11:30 that morning, he indicated that he was not seeking any further changes and that his electronic signature could be applied to it. Notwithstanding this, later that morning Mr Hudson made a number of key changes to the draft which was sent later that day to the Ministry of Justice, albeit a track-changed version was sent to Mr Sampson. One of the changes was that it was no longer the case that "TLS employees will not in law have a right to transfer to the OLC": the word "will" became "may". Material changes were made to the staffing principles, thus for instance, there was no reference to a "market norm".

1. It was soon appreciated that these differences were significant and were not  bridgeable. 7 December 2009 the Law Society wrote to Ms Prentice:

"I understand that you have decided to support OLC's unilateral proposals for recruiting staff to the Office of Legal Complaints, rather than requiring them to continue efforts to agree with the Law Society (as employer of the vast majority of the staff concerned) the way in which your repeated commitments concerning the principles of TUPE could be implemented.

I am concerned that the proposed approach does not comply either with the requirements of TUPE or with the Cabinet Office Statement of Practice: Staff Transfers in the Public Sector.

I understand that OLC's contention is that TUPE does not apply as a matter of law, as a result of the Henke exception. Yet the Henke exception applies only to administrative reorganisation of public administrative authorities, or the transfer of administrative functions between public administrative authorities. It thus depends, in this context on the conclusion that the Law Society is, (for this purpose) a public administrative authority. If the Law Society is a public administrative authority, the Cabinet Office statement of Practice should apply.

I would be grateful if you could let me know, as a matter of some urgency:-

Whether the Government considers that the Cabinet Office Statement of Practice applies.

If so, what exhaustively the Government interprets that Statement Practice as covering.

If the Government considers that the Statement of Practice does not apply, the legal basis and reasons for that conclusion

Irrespective of whether TUPE or the Statement of Practice applies, I would be grateful if you could let me know how you are able to conclude that the arrangements for recruitment proposed by OLC comply with your assurances, bearing in mind that the proposals:-

Do not assure LCS staff of posts at OLC.

Do not protect existing terms and conditions.

Do not apply at all to senior managers.

Indeed, it would be helpful if you could explain to me which of the TUPE principles the proposals do comply with."

This letter is somewhat odd because the Law Society had negotiated an agreement on the basis that LCS staff were not assured of posts at OLC, that existing terms and conditions were not protected and that the provisions did not apply to senior managers. I can only assume that there was a very late change of heart and, probably, advice.

1. There was a meeting between all parties and Ms Prentice on 9 December 2009. A note of that meeting records her as follows:

"She made it clear that in saying that the principles of TUPE should apply to the transfer of staff she meant that she hoped that TLS would act as a responsible employer and work with its staff at the time of instability to provide strong support. At the same time, if staff wanted to move to the OLC, and could demonstrate the required abilities, the OLC should give those staff preferential treatment.

Another, and more frequently expressed commitment given during the passage of the Bill was that the OLC would not be a re-badging of the Legal Complaints Service.

Bridget Prentice said that there is no time to enter further negotiations as staff affected need to be engaged before Christmas and, therefore, that proposals to be issued without further delay. She stated that she is content with the proposal and will endorse it…"

1. On 16 December 2009, Ms Prentice wrote to the Law Society referring to various letters sent by the Law Society, saying among other things:

"You now say that your legal advice is that there is a significant possibility that TUPE may apply to this transition. I am very surprised that this advice has now come to light given that previously Law Society has agreed with OLC and MoJ that legal advice is generally of the opinion that TUPE is unlikely to apply due to the operation of the Hencke [sic] exception, enshrined in Regulation 3(5). While decisions on the application of law are ultimately the courts to decide, it is our view that complaints handling is a public administrative function.

You refer to the applicability of the Cabinet Office Statement of Practice (COSOP). We accept that this is relevant. However, since the OLC will be operating an essentially new activity, it is one of the exceptions listed in paragraph 14."

Dr Gibby accepted in evidence that these two paragraphs were "accurate".

**These Proceedings
**38.The Law Society issued these proceedings on 22 December 2009. It claimed the following declarations, as most recently amended:

"(i) The cessation of the function of the LCS and the start of the function of the OLC is a transfer of administrative functions between public administrative authorities within the meaning of Reg 3(5) TUPE;

(ii) The cessation of the function of the LCS and the start of the function of the OLC is a transfer falling within the scope of the Cabinet Office Statement of Principle and is of the type covered by Paragraphs 17 to 20 thereof.

(iii) Alternatively, the cessation of the function of the LCS and the start of the function of the OLC amounts to a relevant transfer the purposes of Reg 3 of TUPE;

(iv) Alternatively, the cessation of the function of the LCS and the start of the function of the OLC is within the scope of Reg 3(5) TUPE but outside the scope of the Cabinet Office Paper."

1. Defences were served in January 2010 which, broadly, denied that TUPE applied in any event but that, if it did, Regulation 3(5) was engaged to exclude it and that COSOP was inapplicable. Directions were given by Mr Justice Field whereby an expedited trial on this matter could be brought about. Limited disclosure was agreed, ordered and provided. The Solicitors, Counsel and indeed the parties on all sides are to be commended for the efficient and competent way in which this Claim has been brought on, prepared and argued.

1. Essentially, there are three issues:

(i) Is there or is there to be a transfer of LCS' undertaking to OLC where there is a transfer of an economic entity which retains its identity, for the purposes of Regulation 3 of TUPE?

(ii) If so, would it be or amount to the transfer of administrative functions between public administrative authorities for the purposes of Regulation 3(5) of TUPE such as to prevent its being considered as a transfer?

(iii) If so, does COSOP come into play in any material way and whether or not it does is this a case in which the Court should grant any declaration?

I will deal with each issue in turn.

*Is there or is there to be a transfer of LCS' undertaking to OLC where there is a transfer of an economic entity which retains its identity, for the purposes of Regulation 3 of TUPE?
*41. From the wording in Regulation 3, the following is clear:

(a) There must be a (i) transfer of an undertaking to another person (ii) where there is a transfer of an economic entity (iii) which retains its identity (Reg 3(1)).

(b) "Economic entity" means an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary (Reg 3(2)).

(c) Transfers can be to or from public and private undertakings engaged in economic activities whether or not they are operating for gain (Reg 3(4).

1. This legislation is very largely informed by European jurisprudence and indeed legislation. It stemmed from the Acquired Rights Directive (77/187 EEC now Council Directive 2001/23 EC). There is no suggestion that the TUPE Regulations, at least for the purposes of this case, infringe or offend that Directive.

1. The 2007 Act does not as such provide for a transfer of  LCS or its complaints handling function to OLC or indeed, as such, for LCS to be wound up, albeit that Section 157 (not yet in force) will have that effect. In practice, no complaints made to the LCS will be passed on to OLC to be dealt with by OLC; OLC will only deal with new complaints lodged with it.

1. However, it is well established that the determination of whether there has been a transfer of an economic entity for the purposes of the TUPE Regulations does not depend upon there being some contractual, statutory or otherwise clearly documented transfer or transaction. One needs to apply what has been called a "multi-factorial" factual appraisal test whereby one considers what it is that actually in some way goes over from the old to the new operator. Useful guidance was given in the Employment Appeal Tribunal by Lindsay P in Cheesman v R Brewer Contracts Ltd [2001] IRLR 144 after he had reviewed a number of cases referred to by Counsel in this case such as the Suzen and Sanchez Hidalgo cases:

"10. From those four cases we distil the following. We shall attempt, although it is not always a clear distinction, to divide considerations between those going to whether there is an undertaking and those, if there is an undertaking, going to whether it has been transferred. The paragraph numbers we give are references to the numbering in the IRLR reports of the ECJ's judgments. Thus:

(i) As to whether there is an undertaking, there needs to be found a stable economic entity whose activity is not limited to performing one specific works contract, an organised grouping of persons and of assets enabling (or facilitating) the exercise of an economic activity which pursues a specific objective - Sanchez Hidalgo paragraph 25; Allen paragraph 24 and Vidal para 6 (which, confusingly, places the reference to "an economic activity" a little differently). It has been held that the reference to "one specific works contract" is to be restricted to a contract for building works - see Argyll Training infra EAT at paras 14-19.

(ii) In order to be such an undertaking it must be sufficiently structured and autonomous but will not necessarily have significant assets, tangible or intangible - Vidal paragraph 27; Sanchez Hidalgo paragraph 26.

(iii) In certain sectors such as cleaning and surveillance the assets are often reduced to their most basic and the activity is essentially based on manpower - Sanchez Hidalgo paragraph 26.

(iv) An organised grouping of wage-earners who are specifically and permanently assigned to a common task may in the absence of other factors of production, amount to an economic entity - Vidal paragraph 27; Sanchez Hidalgo paragraph 26. An activity of itself is not an entity; the identity of an entity emerges from other factors such as its workforce, management staff, the way in which its work is organised, its operating methods and, where appropriate, the operational resources available to it - Vidal paragraph 30; Sanchez Hidalgo paragraph 30; Allen paragraph 27.

1. As for whether there has been a transfer:-

(i) As to whether there is any relevant sense a transfer, the decisive criterion for establishing the existence of a transfer is whether the entity in question retains its identity, as indicated, inter alia, by the fact that its operation is actually continued or resumed - Vidal paragraph 22 and the case there cited; Spijkers  v Gebrobroeders Benedik Abattoir  [1986] ECR 1119 ECJ; Schmidt v  Spar-und Leihkasse [1994] IRLR 302 ECJ para 17; Sanchez Hidalgo paragraph 21; Allen paragraph 23.

(ii) In a labour intensive sector it is to be recognised that an entity is capable of maintaining its identity after it has been transferred where the new employer does not merely pursue the activity in question but also takes over a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessors to that task. That follows from the fact that in certain labour intensive sectors a group of workers engaged in the joint activity on a permanent basis may constitute an economic entity - Sanchez Hidalgo paragraph 32.

(iii) In considering whether the conditions for existence of a transfer are met it is necessary to consider all the factors characterising the transaction in question but each is a single factor and none is to be considered in isolation - Vidal paragraph 29; Sanchez Hidalgo paragraph 29; Allen paragraph 26. However, whilst no authority so holds, it may, presumably, not be an error of law to consider "the decisive criterion" in (i) above in isolation; that, surely, is an aspect of its being "decisive", although, as one sees from the "inter alia" in (i) above, "the decisive criterion" is not itself said to depend on a single factor.

(iv) Amongst the matters thus falling for consideration are the type of undertaking, whether or not its tangible assets are transferred, the value of its intangible assets at the time of transfer, whether or not the majority of its employees are taken over by the new company, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer, and the period, if any, in which they are suspended - Sanchez Hidalgo paragraph 29; Allen paragraph 26. In determining whether or not there has been a transfer, account has to be taken, inter alia, of the type of undertaking or business in issue, and the degree of importance to be attached to the several criteria will necessarily vary according to the activity carried on - Vidal paragraph 31; Sanchez Hidalgo paragraph 31; Allen paragraph 28.

(vi) Where an economic entity is able to function without any significant tangible or intangible assets, the maintenance of its identity following the transaction being examined cannot logically depend on the transfer of such assets - Vidal paragraph 31; Sanchez Hidalgo paragraph 31; Allen paragraph 28.

(vii) Even where assets are owned and are required to run the undertaking, the fact that they do not pass does not preclude a transfer - Allen paragraph 30.

(viii) Where maintenance work is carried out by a cleaning firm and then next by the owner of the premises concerned, that mere fact does not justify the conclusion that there has been a transfer - Vidal paragraph 35.

(ix) More broadly, the mere fact that the service provided by the old and new undertaking providing a contracted-out service or the old and new contract-holder are similar does not justify the conclusion that there has been a transfer of an economic entity between predecessor and successor - Sanchez Hidalgo paragraph 30.

(x) The absence of any contractual link between transferor and transferee may be evidence that there has been no relevant transfer but it is certainly not conclusive as there is no need for any such direct contractual relationship Sanchez Hidalgo paragraphs 22 and 23.

(xi) When no employees are transferred, the reasons why that is the case can be relevant as to whether or not there was a transfer - ECM page 1169 e-f.

(xii) The fact that the work is performed continuously with no interruption or change in the manner or performance is a normal feature of transfers of undertakings but there is no particular importance to be attached to a gap between the end of the work by one sub-contractor and the start by the successor - Allen paragraphs 32-33.

1. More generally the cases also show:-

(i) The necessary factual appraisal is to be made by the National Court - ECM page 1168 e; Allen paragraph 28.

(ii) The directive applies where, following the transfer, there is a change in the natural person responsible for the carrying on of the business who, by virtue of that fact, incurs the obligation of an employer vis-a-vis the employees of the undertaking, regardless of whether or not ownership of the undertaking is transferred - Allen paragraph 16.

(iii) The aim of the Directive is to ensure continuity of employment relationships within the economic entity irrespective of any change of ownership - Allen paragraph 23 - and our domestic law illustrates how readily the Courts will adopt a purposive construction to counter avoidance - see Lord Oliver's speech in Litster v Forth Dry Dock Co. Ltd [1990] 1 AC 546 at 562f- 563c."

1. A useful and necessary first step therefore is to consider whether or not LCS is an undertaking in the light of the current TUPE Regulations. I have no doubt that LCS is an undertaking, as such, having regard to the factors set out in Cheesman at Paragraph 10 (see above). The fact that it does not do what it does for gain does not make it anything other than an undertaking (see Regulation 3(4)). It has an identity of its own in that it is the relatively autonomous part of the Law Society which deals with complaints about professional service. The fact that it is not a business as such is immaterial because the Regulations do not differentiate between undertakings and businesses.

1. The next step is to determine, as one must, whether LCS is in effect an "economic entity"; by Regulation 3(2), one needs to consider whether the LCS "has the objective of pursuing an economic activity, whether or not that activity is central or ancillary". I have no doubt that LCS's central activity is not an economic activity; its central activity is the resolution of complaints made against members or affiliates of the Law Society and it is, primarily, regulatory (see by analogy Institute of Chartered Accountants in England and Wales v Customs and Excise Commissioners [1999] 1 WLR 701). However, on balance, I consider that in a broad sense there is an ancillary economic activity: the Law Society represents solicitors who provide a wide range of professional services to the public; that is economic activity and the servicing of complaints against solicitors through what could be considered an autonomous subsidiary part of the Law Society, LCS, effectively is an ancillary service or facility which can provide redress or compensation for complainants. In this context, although the Ministry of Justice relied upon the case of Henke v Gemeinde Schierke [1997] ICR 746, this was a German-based case which related to a period prior to the TUPE Regulations in this case; in the Henke case, as the judgement of the Court makes plain, the "ancillary" definition was not applicable.

1. When one then moves on to consider the facts and factors that need to be taken into account to determine whether there is a transfer, a number of authorities indicate that it is insufficient simply that the activity of the transferor or is to be carried out by the transferee. In S?zen v Zehnacker Gebäudereinigung GmbH  [1997] ICR 662 , the Court provided useful guidance:

"14. In order to determine whether the conditions for the transfer of an entity are met, it is necessary to consider all the facts characterizing the transaction in question, including in particular the type of undertaking or business, whether or not its tangible assets, such as buildings and movable property, are transferred, the value of its intangible assets at the time of the transfer, whether or not the majority of its employees are taken over by the new employer, whether or not its customers are transferred, the degree of similarity between the activities carried on before and after the transfer, and the period, if any, for which those activities were suspended. However, all those circumstances are merely single factors in the overall assessment which must be made and cannot therefore be considered in isolation (see, in particular, Spijkers and Redmond Stichting, paragraphs 13 and 24 respectively).

1. As observed by most of the parties who commented on this point, the mere fact that the service provided by the old and the new awardees of a contract is similar does not therefore support the conclusion that an economic entity has been transferred. An entity cannot be reduced to the activity entrusted to it. Its identity also emerges from other factors, such as its workforce, its management staff, the way in which its work is organized, its operating methods or indeed, where appropriate, the operational resources available to it.

1. The mere loss of a service contract to a competitor cannot therefore by itself indicate the existence of a transfer within the meaning of the directive. In those circumstances, the service undertaking previously entrusted with the contract does not, on losing a customer, thereby cease fully to exist, and a business or part of a business belonging to it cannot be considered to have been transferred to the new awardee of the contract.

1. It must also be noted that, although the transfer of assets is one of the criteria to be taken into account by the national court in deciding whether an undertaking has in fact been transferred, the absence of such assets does not necessarily preclude the existence of such a transfer (Schmidt and Merckx, cited above, paragraphs 16 and 21 respectively).

1. As pointed out in paragraph 14 of this judgment, the national court, in assessing the facts characterizing the transaction in question, must take into account among other things the type of undertaking or business concerned. It follows that the degree of importance to be attached to each criterion for determining whether or not there has been a transfer within the meaning of the directive will necessarily vary according to the activity carried on, or indeed the production or operating methods employed in the relevant undertaking, business or part of a business. Where in particular an economic entity is able, in certain sectors, to function without any significant tangible or intangible assets, the maintenance of its identity following the transaction affecting it cannot, logically, depend on the transfer of such assets.

1. The United Kingdom Government and the Commission have argued that, for the entity previously entrusted with a service contract to have been the subject of a transfer within the meaning of the directive, it may be sufficient in certain circumstances for the new awardee of the contract to have voluntarily taken over the majority of the employees specially assigned by his predecessor to the performance of the contract.

1. In that regard, it should be borne in mind that the factual circumstances to be taken into account in determining whether the conditions for a transfer are met include in particular, in addition to the degree of similarity of the activity carried on before and after the transfer and the type of undertaking or business concerned, the question whether or not the majority of the employees were taken over by the new employer (Spijkers, cited above, paragraph 13).

1. Since in certain labour-intensive sectors a group of workers engaged in a joint activity on a permanent basis may constitute an economic entity, it must be recognized that such an entity is capable of maintaining its identity after it has been transferred where the new employer does not merely pursue the activity in question but also takes over a major part, in terms of their numbers and skills, of the employees specially assigned by his predecessor to that task. In those circumstances, as stated in paragraph 21 of Rygaard, cited above, the new employer takes over a body of assets enabling him to carry on the activities or certain activities of the transferor undertaking on a regular basis.

1. It is for the national court to establish, in the light of the foregoing interpretative guidance, whether a transfer has occurred in this case."

1. This case and others (see for instance Sanchez Hidalgo v Asoçiaçion de Servicios Acer [1999] IRLR 136) caution against jumping to the conclusion that the mere fact that the service provided by the old and new undertaking is similar does not justify the conclusion that there has been a transfer of an economic entity by the one to the other. There is of course a logic in that because, if one business ceases to function for one reason or another and coincidentally another business is set up and seeks to perform the same activities, it is difficult to say from this factor alone that there has been a transfer of an economic entity from one to the other. It might of course be different if a controlling organisation or public body shuts down the business being carried out by X and starts it up again to be carried out by Y (see Sophie Redmond Stichting v Bartol [1992] IRLR 366).

1. I have formed the very clear view that there is neither a transfer of the LCS undertaking nor will there be a transfer in which the economic entity represented in or by LCS' undertaking will, can or is intended to retain its identity. I am conscious that usually the time at which to assess whether the transferor's identity has been retained within the transferee is after the alleged transfer has taken place but I have been asked to form a view now albeit before any transfer has actually happened. The primary factors stem from the type of organisations which LCS is and has been and which OCL is or is certainly intended to be. OCL has been set up as a body which not only is but is intended to be perceived to be totally independent of any of the professions against whose members complaints can be pursued. It can not be considered as self regulating as the LCS is. Parliament undoubtedly intended it to be so. That appears not only in the wording of the 2007 Act but also from the Clementi Review and the Parliamentary debates that preceded its coming into law. The context was of course the predecessor organisations of LCS which had attracted criticism and complaint over the preceding years and it seems undoubtedly to have been the case that LCS has sought to improve and change. However, one can not get away from the basic fact that LCS is a subsidiary, albeit autonomous, organisation within the Law Society and all its staff and the bulk of its funding come from the Law Society and its members. Its identity is inextricably mixed up with that of the Law Society itself; I do not by that intend or imply any criticism at all either of the Law Society or LCS. The LCS is part of a self regulation system and that is a key part of its identity (and it is not necessarily the worse for that). Ms. Evans, the Chief Executive of LCS accepted that LCS had functional but not structural independence from the Law Society. I am not convinced on the evidence that LCS is wholly functionally independent. The facts that all the employees are employed by the Law Society and that LCS' budget has to be reviewed and agreed by the Law Society suggest otherwise although I do not doubt that the employees consider themselves independent of the Law Society and seek to act independently. The very fact that the Law Society without reference to LCS sought to deal direct with MoJ and OLC about the future of the LCS staff suggests a residual element of functional control although again I do not doubt that this was all done in good faith and with the best of intentions.

1. The reality is that, apart from any employees who are or may be taken on by OLC, there is nothing which is in any normal sense going to be transferred by LCS to OLC. None of the tangible or indeed intangible assets of LCS will go over. None of the buildings will be transferred to or used by OLC. None of the complaints being processed by LCS will be transferred over to be finished off by OLC. On any sensible analysis, the only activity which was dealt with by LCS but will also be dealt with by OLC is the processing of complaints about solicitors, albeit that OLC will also have the additional function of dealing with complaints in respect of other parts of the legal professions such as the Bar.

1. It is argued that, as OLC will numerically be dealing with the very large percentage of complaints (possibly 90% of all complaints) against solicitors, that very proportion suggests that LCS's identity will be retained. However, the numbers of complaints that may be dealt with do not really assist logically in determining whether the identity is retained. It cannot readily be said that OLC is LCS "writ large".

1. There was substantial debate as to whether or not there was likely to be any material difference in the procedures for processing complaints as between LCS and OLC. Subject to a number of important differences, I did not perceive on the evidence much difference. In both organisations, the complaints have to be received by one means or another (telephone, letter, e-mail or fax), attempts made to ascertain whether there really is a viable complaint and if so what the complaint really is about, attempts to resolve the complaints through a conciliatory-type approach, transmission of unresolved complaints to someone for a decision and then some type of enforcement will follow. The fact that different words are used to describe the different stages is immaterial.

1. I do consider that in several respects however the OLC jurisdiction is materially and substantially different from the LCS jurisdiction or approach. Unlike the LCS, the final resolution of unresolved disputes will be by an ombudsman scheme. Ombudsmen under the 2007 Act cannot during their appointment carry on any activity which is a reserved legal activity for reward (Section 122(3)). Their terms of engagement must be such as to ensure their independence (see Section 123 (8)). The criterion in any determination by an ombudsman is that it should be "fair and reasonable in all the circumstances of the case" (Section 137(1)); that determination therefore does not have to been necessarily by reference to the rules or practice of the different professions whose members are the subject matter of complaints. That is consistent with the statutory requirement of "protecting and promoting the interests of consumers". That remit is essentially broader than the remit of adjudicators under the LCS scheme, although I have no doubt that such adjudicators would seek to act fairly and reasonably. LCS adjudicators are primarily concerned with what it was reasonable to expect of the respondent as a solicitor in the context of whether there has been inadequate professional service. The facts that all the adjudicators are solicitors and that some complaints are outsourced to solicitors point strongly to a perceived need to involve solicitors in deciding complaints which is a need which is not recognised within the OLC set up.

1. There are very much wider and more direct powers available to the OLC and these relate to the enforcement of ombudsmen's determinations directly through the courts (Section 141). An ombudsman can procure through the courts the enforcement of requirements made against either party to produce documents or information (Sections 147-149). These are not powers which the LCS or its adjudicators have. Ombudsmen can certainly more readily hold hearings and require the parties to attend hearings and give evidence (Section 133) whereas it is at best obscure whether LCS can hold hearings; the evidence certainly is strongly suggested that hearings are exceptionally rare and in any event parties' attendance can not be enforced.

1. OLC will not be constrained by what might be called multi-discipline disputes where the complaint is that a number of different legal professionals have behaved in some inappropriate way; in effect because OLC is charged with dealing with complaints from all the legal professions it can deal with them in a way which LCS could not and did not. Similarly OLC will not be constrained in practice by complaints of professional negligence in the way that LCS was. In so far as complaints about professional misconduct are concerned, the OLC scheme is such that the ombudsman's jurisdiction is not excluded albeit that suspected misconduct must be reported to the relevant regulatory body (Section 143).

1. There are some real differences so far as case fees are concerned. For the LCS, a complainant can be asked to pay a case fee (albeit refundable if the complaint is upheld) whilst OLC has no such power. To the contrary OLC must charge a case fee to lawyers (albeit that it can be waived or refunded). OLC has power to award costs to be paid to the complainant by the respondent (Section 133(3)) whilst LCS does not. The focus, rightly or wrongly, in the case of the OLC is on the complaining consumer.

1. There is a substantive difference in the essence of the complaints which may be made to LCS as compared with OLC. Complaints to the former are as to whether the solicitors' services "are of the quality which is reasonable to expect" whilst to the latter complaints are to be by reference to "reasonable standards of service". The former reasonable expectation standard must necessarily raise issues of what is reasonably expected of solicitors whilst the reasonable service standards are not so constrained albeit it may well be that the two tests produce the same answer in any given case and that it is not immaterial in a complaint to OLC for a solicitor to explain behaviour by reference to solicitors' standards of service.

1. I do not attach much importance to the difference in the financial limits are relating to claims (currently £15,000 in respect of LCS and £30,000 in relation to LCS complaints). There is little evidence before the court that the increased limit will make any significant difference in the number or type of disputes. Similarly I do not attach significance to the fact that the LCS proceeds upon the basis of published policies as to how it addresses complaints whilst the OLC is required to produce Scheme Rules. Similarly the fact that generally the time limits for bringing complaints are different (6 months for LCS and 12 months for OLC) is a relatively minor difference and there was no evidence that a significantly greater number of complaints will be caught by a 12 month general time-limit rather than a 6 month one.

1. It is said that OLC will adopt non-legalistic or less legalistic approaches to complaint resolution than LCS. Whilst I have no doubt from the evidence that this is OLC's aspiration and that aspiration may turn out to be achieved, it is difficult to see how complaints which do involve legalities can be finally resolved without some consideration of those legalities. Similarly, a solicitor against whom complaint is made must be entitled at least to assert during an OLC complaints handling process that there was a good legal or practice reason for what he or she is alleged to have said or done (or not said or not done). It is therefore difficult to see this aspiration as giving rise to significant differences at this stage.

1. It is difficult to form any concluded view on how many of the current LCS staff (some 345 in number) want to move across to OLC. An informal straw poll suggests that only about one third want to move albeit about another third might be prepared to do so in effect if nothing else is on offer. I find it difficult to attach any weight one way or another as to this factor as it is based on such imperfect information.

1. I do not see how the identity of LCS will or could be transferred to OLC. As the Law Society itself said in a relatively recent letter to OLC (26 October 2009) in suggesting what a speaker might suggest:

"I think the most useful territory for Elizabeth to cover would be to describe her vision for the way in which OLC should operate. In particular, getting across to the Council the sort of messages she conveyed to the Justice Select committee about the way in which she hopes the OLC-as a brand-new body, with no history to constrain it-can take a much more modern (and less legalistic) approach to dispute resolution. We hope she might emphasise that whilst many of the same skills used in LCS may be helpful, the culture and approach of OLC will be very different.

Emphasising the difference would be very helpful. A number of Council members (and solicitors generally) feel that LCS is biased against solicitors. I think this may arise from the fact that LCS bends over backwards to be fair to consumers, precisely because it operates under the ambit of the Law Society. If Elizabeth were able to get across the message that OLC is an independent dispute resolution body, rather than being either "the lawyer's friend" or the "consumer champion" that would be very welcome."

From all the evidence that I have seen and heard, the independence of OLC, actual and perceived, functional as well as structural, coupled with the wide range of powers and obligations granted to and imposed upon it are such that the probability is that "the culture and approach of OLC will be very different" from that of LCS. It follows from this that it is improbable that the identity of LCS will or could remain.

1. It follows from the above that I am satisfied for all of the above reasons that  there neither is nor is to be a transfer of LCS' undertaking to OLC in that there is or is to be no transfer of an economic entity which retains its identity, for the purposes of Regulation 3 of TUPE.

*If there otherwise was a transfer of an undertaking, would it be or amount to the transfer of administrative functions between public administrative authorities for the purposes of Regulation 3(5) of TUPE such as to prevent its being considered as a transfer?
*63. This question is relatively easily answered, albeit in the light of the answer I have given to the first issue it is strictly unnecessary to do so. On closing, Leading Counsel for the Law Society, doubtless on instructions, became distinctly lukewarm (if not positively neutral) as to whether I should make the declaration sought by his client. Regulation 3(5) reflected what has been called the Henke exception and is a relatively innocuous looking clause:

"An administrative reorganisation of public administrative authorities or the transfer of administrative functions between public administrative authorities is not a relevant transfer."

Since on any account (and it is not argued otherwise) there has been in this case no administrative reorganisation of public administrative authorities, one needs to consider whether there has been the transfer of administrative functions between public administrative authorities in order to determine whether or not whatever has happened is a relevant transfer. Thus, one needs to determine whether LCS was a public administrative body which has administrative functions which are to be transferred to OLC.

1. The case of Henke informs the discussion. The case was concerned with the combining of German municipalities to form an administrative "collectivity" in circumstances where those municipalities had previously engaged in such activities as tourism, day nurseries, the operation of car parks and local transport. Mrs Henke had been dismissed from one of the municipalities and she argued amongst other things that her contract of employment had been transferred to the new collectivity. In circumstances where there then no provision about transfer of functions between public administrative authorities, the Court stated:

"14. Consequently, the reorganization of structures of the public administration or the transfer of administrative functions between public administrative authorities does not constitute a "transfer of an undertaking" within the meaning of the Directive…

1. It appears that, in the circumstances to which the main proceedings relate, the transfer carried out between the municipality and the administrative collectivity related only to activities involving the exercise of public authority. Even if is assumed that those activities had aspects of an economic nature, they could only be ancillary."

1. The reference in Paragraph 17 of that judgement to the exercise of public authority (also picked up in other cases such as Sanchez Hidalgo v ADSA [1999] IRLR 136 and Mayeur v APM [2000] IRLR 783) provides a pointer to what a public administrative body might be considered to be: a body which exercises public authority. In Adult Learning Inspectorate v Beloff (30 January 2008), the Employment Appeal Tribunal upheld at Paragraph 30 (and set out) findings by the Employment Tribunal quoted in the following terms:

"20. There is no statutory definition of what constitutes a public administrative authority. The claimant's representative accepted, rightly in our view, that Ofsted is a public administrative authority.

1. In our judgment, a public body whose functions involve the exercise of public authority would be a public administrative authority for the purposes of TUPE. We have, in our findings of fact, compared the powers and functions of Ofsted and ALI. Both bodies are created by statute and have a statutory remit, statutory functions and statutory powers. We accepted that the ALI carries out activities that could be described as commercial in nature however it was clear to us that those were ancillary to its core business which was that of inspection. It was set up by the Government as an inspectorate and it the majority of its funding was provided by the Government for the purpose of carrying out those functions. We accepted the respondents' proposition that the ECJ cases in which it was held that the Henke exception did not apply, draw a distinction, perhaps most clearly set out in the Sanchez Hidalgo case at paragraph 24, between whether the service being provided involves the exercise of public authority or not. In that case, and the joined case of Zeimann, there was contracting out of home help and surveillance services respectively, neither of which involved the exercise of public authority, and it was held that TUPE applied. The Cabinet Office statement of practice relating to staff transfers in the public sector, states that TUPE transfers can apply in the public sector. This is not (as was suggested by the claimant's representative) inconsistent with the ECJ case law. It reflects that case law. The key question was whether the ALI's functions involved the exercise of public authority. We were satisfied that the statutory powers and functions of the ALI concern the exercise of public authority. We were also satisfied that they are similar in nature to those of Ofsted and that those core functions and powers are being transferred in their entirety to New Ofsted. Consequently, it appeared to us that the transfer of functions from ALI to New Ofsted is a statutory transfer of administrative functions between public administrative authorities. It follows from the Henke case and from the exception contained in Regulation 3(5) of TUPE 2006, that this is not a transfer to which TUPE 1981 or TUPE 2006 apply. Consequently, our unanimous judgment is that the tribunal has no jurisdiction to hear the claimant's complaint in respect of failure to consult as required by TUPE."

1. One therefore turns to consider whether LCS is a body which has exercised public authority. The fact that it is not a government service as such is in logic immaterial although it may well almost invariably be the case that government departments and Non Departmental Public Bodies do exercise such authority. There have been a number of European cases in which private companies are said to exercise public authority (see e.g. Diego Cali v SEPG SpA [1997 1 ECR 1547).

1. The House of Lords case of Institute of Chartered Accountants v Commissioners for Customs & Excise [1999] 1 WLR 701 provides informative assistance. The opinion of Lord Slynn with which the other members of the House agreed set out at Paragraph 1 the issues:

"Two questions have been raised on this appeal. The first is whether section 4 of the Value Added Tax Act 1994 and article 4 of the Sixth Council Directive 77/3881 E.E.C. of 17 May 1977 ("the Directive") make chargeable to Value Added Tax certain activities carried out by the Institute of Chartered Accountants in England and Wales with the consequence that the Institute can claim repayment or set-off of Input Tax paid on goods and services supplied to the Institute, the latter being the real purpose of these proceedings. If the activities are chargeable to tax, then the second question arises as to whether the Institute is a body governed by public law and whether it engages in these activities as a public authority, in which case the Institute is not considered a taxable person in respect of these activities…"

1. Lord Slynn went on:

"On the basis of cases like Eurocontrol [1994] E.C.R. I-43 and as a matter of ordinary language, I do not consider that what is done here by the Institute is such an economic activity. The Institute is carrying out on behalf of the State a regulatory function in each of these three financial areas to ensure that only fit and proper persons are licensed or authorised to carry out the various activities and to monitor what they do. This is essentially a function of the State for the protection of the actual or potential investor, trader and shareholder. It is not in any real sense a trading or commercial activity which might justify it being described as 'economic' and the fact that fees are charged for the granting of the licences (to be assessed overall on a break-even basis) does not convert it into one…

In relation to the Directive, the Tribunal said:

"A regulatory activity carried out under a statutory power for the purpose of protecting the public by supervising and maintaining the standards of practitioners in, for example, the Financial Services field falls on the other side of the line from economic activities."

In the present case, I agree that that is entirely right and the same goes for "business" in the context of these three Statutes."

1. Although this House of Lords case was concerned with different issues, it follows in logic that regulatory functions can (and should here) be distinguished from economic activity. Regulatory activity designed to protect the public by bringing to account practitioners whose service falls below an acceptable standard can be said to be administrative rather than anything else.

1. There has been some authority about the Law Society which casts some light on the capacity in which it acts. In Parochial Church Council of the Parish of Aston Cantlow and Wilmcote with Billesley, Warwickshire  v Wallbank and another [2003] UKHL 37, Lord Nicholls said in reviewing parts of the Human Rights Act and the difference between public authorities and private organisations:

"9. In a modern developed state governmental functions extend far beyond maintenance of law and order and defence of the realm. Further, the manner in which wide ranging governmental functions are discharged varies considerably. In the interests of efficiency and economy, and for other reasons, functions of a governmental nature are frequently discharged by non-governmental bodies. Sometimes this will be a consequence of privatisation, sometimes not. One obvious example is the running of prisons by commercial organisations. Another is the discharge of regulatory functions by organisations in the private sector, for instance, the Law Society. Section 6(3)(b) gathers this type of case into the embrace of section 6 by including within the phrase 'public authority' any person whose functions include 'functions of a public nature'. This extension of the expression 'public authority' does not apply to a person if the nature of the act in question is 'private'."

1. I am satisfied that LCS is a public administrative body which has not had administrative functions which are to be transferred to OLC, for the following reasons:

(i) It is a part of the Law Society which is a body which by the Solicitors Act, the 2007 Act and a number of other statutes has very wide powers and duties of control over and regulation of solicitors. That is something which is a matter of public interest and importance, namely that the tens of thousands of solicitors who do necessary work which affects numerous clients are subject to its regulation and control.

(ii) One of those functions is providing redress for professional services "which are not of the quality which it is reasonable to respect of" solicitors. That function is exercised by LCS which is a relatively autonomous part of the Law Society. Thus LCS is effectively exercising a statutory power or duty.

(iii) LCS has a quasi-judicial function in doing what it does. The adjudicators produce decisions which are at least binding on the solicitors in question. The adjudications are effectively final. There are wide ranging powers to assist in that function.

(iv) LCS' decision making function is subject to judicial review (see e.g R (Wayne Thompson) v the Law Society [2004] EWCA 167 .

1. It follows that TUPE Regulation 3(5) bites as OLC is statutorily to assume these functions; indeed, it has not been argued that OLC is not a public authority to whom these administrative functions are being transferred.

*If the answer to the previous issue is in the affirmative , does COSOP come into play in any material way and whether or not it does is this a case in which the Court should grant any declaration?
*73. The Cabinet Office paper "Staff Transfers in the Public Sector Statement of Practice" ("COSOP") forms the basis of the Law Society's third head of declaration. Its argument is that the cessation of the functions of the LCS and the start of the functions of the OLC is a transfer falling within the scope of the COSOP and is of the type covered by Paragraphs 17 to 20 thereof. This argument is put forward in anticipation that any decision which the relevant Minister may make (for instance about whether a transfer order may be made under the Employment Relations Act) may have to be made with the constraint which the declaration sought may impose. This is all in the potential context that what the Minister may or may not decide to do may then be subject to judicial review. The Law Society through its Counsel accepts that, if it fails to establish that TUPE applies at all (i.e. if it fails on the first issue), the COSOP argument fails also. Accordingly, it is strictly unnecessary for me to decide this third issue but, lest it be relevant and out of deference to the arguments put forward, I do so.

1. All parties, rightly, accept that this Court has a discretion as to whether to grant a declaration.

1. COSOP is simply a statement of practice put out by the Cabinet Office as representing the Government's approach and policy. That is not to belittle it but it is not binding in law; it is not a statute or statutory instrument and does not in itself give rise to any enforceable rights. Ministers are not in any absolute terms required to implement it. It is not a document to which the Interpretation Act 1978 applies and is not subject necessarily to the normal canons of contractual or statutory interpretation. I must therefore exercise substantial caution in reviewing what COSOP means although I and I believe all parties do not go so far as Humpty Dumpty: "when I use a word it means what I choose it to mean-neither more nor less" (Alice through the Looking Glass).

1. The Guiding Principles of COSOP are said at page 2 to be:

" - The Government is committed to ensuring that the public sector is a good employer and model contractor and client. The people employed in the public sector, directly and indirectly, are its biggest assets and critical in developing modern, high quality, efficient, responsive, customer focused and environmentally friendly public services.

• The Government's approach to modernising public services is a pragmatic one, based on finding the best supplier who can deliver quality services and value for money for the taxpayer. This involves some services or functions being provided by, or in partnership with, the private or voluntary sector, or restructured and organised in a new way within the public sector. The involvement, commitment and motivation of staff are vital to achieving smooth and seamless transition during such organisational change.

• Public Private Partnerships and the process of modernisation through organisational change in the public sector will be best achieved by clarity and certainty about the treatment of staff involved. The Government is committed to ensuring that staff involved in all such transfers are treated fairly and consistently and their rights respected. This will encourage a cooperative, partnership approach to the modernisation of the public sector with consequential benefits for all citizens."

1. Relevant parts of the Introduction are:

"1. In order to meet these guiding principles the Government believes that there must the a clear and consistent policy for the treatment of staff, founded upon the provisions of…TUPE…This Statement of Practice sets out the framework that the Government expects all public sector organisations to work within to achieve this aim (see paragraph 6 for the coverage of this Statement).

1. TUPE implements the 2001 European Council Acquired Right Directive. In broad terms, TUPE protects employees' terms and conditions… when the business or service in which they were is transferred from one employer to another. Employment with the new employer is treated as continuous from the date of the employee's start with the first employer. Terms and conditions cannot be changed where the operative reason for the change is the transfer although changes are other reasons may be negotiated, subject to certain conditions.

1. In the area of Public Private Partnerships and change in the public sector, the consultations that the Government has undertaken in the representations which had been made, and showed a strong consensus between private sector employers, the voluntary sector, employee representatives and public sector organisations for the application of TUPE to situations where a service or function is contracted out, then read tendered, brought back into the public sector, transferred within the public sector, or restructured and organised in a new way in a different part of the public sector. In any event, the TUPE Regulations 2006 and expanded the previous definition of what constitutes a transfer. It is accepted that there will still be some genuinely exceptional circumstances where TUPE will not apply but it is anticipated that there will be fewer than under the 1981 Regulations. Attempts to orchestrate a non-TUPE situation in other circumstances should not be tolerated. The policy in this Statement of Practice is therefore based on the following principles:

• contracting-out exercises with the private sector and voluntary organisation and transfers between different parts of the public sector, will begin the long the bases of staff will transfer and TUPE should apply, unless there are genuinely exceptional reasons not to do so…

• in circumstances where TUPE does not apply in strict legal terms to certain types of transfer between different parts of the public sector, the principles of TUPE should be followed (where possible using legislation to effect the transfer) and the staff involved should be treated no less favourably than have the Regulations apply…"

78.The Section headed "Coverage" addresses what and whom the Statement covers:

"6.This Statement of Practice sets out a framework to be followed by public sector organisation to implement the Government's policy on the treatment of staff transfers where the public sector is the employer when contracting out or the client in a subsequent re-tendering situation. It applies directly to Central Government Departments and Agencies and to the NHS. The Government expects other public sector organisations to follow this Statement of Practice. Local government is subject to some different considerations…The Personnel and Human Resources panel of the Local Government Association support the principles set out in this Statement of Practice and have encouraged their adoption by individual local authorities.

1. The Statement of Practice covers the following types of situation that may involve transfers of staff:

- Public Private Partnerships…

• Second and subsequent generation contracting where, when the contract was first awarded, staff transferred from the public sector …

• Reorganisations and transfers from one part of the public sector to another, (paragraphs 17-20)

• Reorganisations and transfers within the Civil Servants (where TUPE cannot apply because there is no change in employer but TUPE principles should be followed…"

1. It can be seen that COSOP is intended to apply to what it calls the "public sector" and, as has been properly accepted by Counsel for the Law Society, the only "type of situation" under which the LCS/OLC transfer could arguably come is "Reorganisations and transfers from one part of the public sector to another" as set out in Paragraph 17.  Paragraph 17 states:

"TUPE can apply to the transfers of a function from one part of the public sector to another where there is a change of employer. This, for example, can include:

• Transfers between local government and civil service Departments and agencies

• Transfers between local governments and NDPBs

• Transfers between local government and the NHS

• Transfers between the NHS and Civil Service Apartments and Agencies

• Transfers between the NHS and NDPBs

• Transfers between NDPBs and civil service departments and agencies"

1. Paragraph 18 refers to the case of Henke and TUPE Regulation 3(5), which suggests that the drafters of this Statement of Practice had this in mind but it stops short of saying that whenever Regulation 3(5) applies the Government will effect a TUPE transfer nonetheless. Paragraph 19 acknowledges that usually Government will legislate for transfers and Paragraph 20 goes on to say:

"Section 38 of the Employment Relations Act also includes a power that can be used to apply the requirements of TUPE specifically to transfers outside the scope of the Directive…Where, for whatever reason, this power or other legislation is not used there will be no legal requirement or obligation in such cases for staff to transfer to another part of the public sector where the function is to be performed (as to attempt to compel them would, in effect, constitute a unilateral change in their employment contracts by imposing a change of employer). In such cases, as a matter of policy, public sector bodies should insure that the principles underpinning TUPE are followed, so staff are offered the opportunity to transfer on terms that are, overall, no less favourable than had TUPE applied. They should also ensure appropriate pension provision and redundancy and severance terms. Staff who choose not to transfer should, where possible, be redeployed within the transferring public sector organisation."

1. It is argued by the Law Society that LCS is to be considered as a public sector body to which COSOP is intended to apply and that in effect its staff should be transferred to OLC by one means or another. It argues for what it accepts might be called a "purposive" interpretation of COSOP in that it is said that it is clearly intended that all transfers excluded by Regulation 3(5) are to be covered. The MoJ and OLC argue otherwise.

1. I am not going to make a definitive interpretation of COSOP. If I was not to do so, much more information would be required than has been provided such as to what types of transfer it been applied in the past and as to the background in which this paper and its November 2007 revision were drafted. This type of investigation has not been possible in the short time available between the issue of the proceedings and the hearing.

1. However, based purely on the wording, I doubt very much whether COSOP was intended to be applied to private sector organisations whose functions are to be stopped and a new organisation set up by statute to carry out those functions amongst others. My reasoning thus far is as follows:

(a) It is not obvious that LCS would be considered to be a "public sector body" either in the ordinary sense of the term or in the sense in which it used in COSOP itself. LCS is part of the Law Society and all its employees are employed by the Law Society which regulates and promotes solicitors in private practice and employment. All the examples given in COSOP are not apt to describe LCS (e.g. it is not a "Central Government Department or Agency", the NHS, local government, part of a Public Private Partnership, part of the Civil Service or an NDPB (Non-Departmental Public Body). Whilst that is not absolutely determinative, it is a strong pointer.

(b) One would have thought that the Cabinet Office would have been aware that there were private sector organisations such as LCS or the Institute of Accountants which carried out administrative functions for the public good and would therefore have made specific reference to that type of organisation in COSOP if COSOP was to be applied to them.

(c) Paragraph 20 itself suggests that where Section 38 of the Employment Relations Act is not used to effect the transfer, there is no legal requirement or obligation to effect such a transfer of staff and that "public sector bodies should ensure that the principles underlying TUPE are followed". What that must mean is that TUPE does not actually apply but its principles should be followed. I find it difficult to say that those principles are not followed if staff from LCS are offered, preferentially, job opportunities at OLC with employment rights retained if taken on (e.g. redundancy backdated to when they were first employed by LCS). What Paragraph 20 is not saying is that, although TUPE is inapplicable in law and fact, it must be applied nonetheless. The application of TUPE principles is not defined and that may well be because the permutations of fact were thought to be likely to be so varied that a paper like this could not deal with all of them.

(d) LCS falls more obviously into the category of a private sector body which is discharging a public interest function. The Law Society, although it is not bound by the concession, rightly accepted through its Opening Skeleton argument that it "is not itself a public sector authority but is a body "owned and operated by the solicitors' profession" (Paragraph 19(i)).

1. I am very reluctant, and decline, to make any declaration on the topic at all. My reasons are as follows:

(a) There is currently no legal claim based on COSOP pursued or pursuable by the Law Society.

(b) This Claim is being heard in the general list of the Queen's Bench Division and not in the Administrative Court.

(c) It is premature to determine an element of what, and upon what issue, a Minister may have to decide in the future; assuming that the issue relates to the possible transfer of staff from LCS to OLC, the Minister will not be legally bound to follow COSOP but may have to make an intra vires decision which is Wednesbury reasonable (or not unreasonable) taking into account all the circumstances at the time of making the decision. The issue of the applicability of COSOP to the extent that it is taken or not taken into account in the making of the decision can be considered then in the light of all the circumstances. It must generally be undesirable to pick off for judicial scrutiny, in advance of any potentially judicially reviewable decision, by way of declaration, elements that may or may not have to be taken into account by the person who will have to make that decision in the future.

(d) I doubt whether it would always be an abuse of process to seek such a declaration as the Law Society seeks but I bear in mind as apt what Mr Justice Ramsey said in Clerical Medical Investment Group Ltd v Crest Nicholson (South West) Ltd and others [2006] EWHC 2481 (TCC), albeit in the context of a standard possibly applicable to design:

"113. Secondly, I have been referred to the decision of the Court of Appeal in North West Thames Regional Health Authority v Sheppard Robson [1995] 50 Con LR 79 in support of the proposition that the courts do not generally make declarations of future rights which are no more than hypothetical or which are merely a prelude to further proceedings where issues of negligence may be raised.

1. In particular, in this case, I am concerned whether the issue of standard practice can properly form of the basis of a declaration. First, standard practice is a difficult concept and may vary widely, depending on the particular factual circumstances. Secondly, it is a question of fact, not a question of legal right. Thirdly, the issue is evidently a prelude to a claim based on the specification.

1. Whilst in this case I quite understand the importance for the parties to know what assumptions might properly be made, I do not consider that the court should make binding declarations which are not firmly grounded upon particular legal obligations. To do so is likely to have unfortunate consequences in any future proceedings, not least because the impact of that declaration on any particular future contentions would be uncertain.

1. In certain circumstances, through such methods as early neutral evaluation, the TCC may be able to deal with such issues, but the route of making binding declarations is not, in my judgment, available."

(e) I also bear in mind that it is undesirable for ministers to fetter their discretion by any rigid adherence to a declared policy so that, even if COSOP did mean what the Law Society argues it means, a minister would not be bound by COSOP to the exclusion of every other factor but would have to take into account all relevant circumstances. As Lord Clyde said in R (Alconbury Developments Ltd) v Secretary of State for the Environment Transport and the Regions [2001] UKHL 23 at Paragraph 143:

"One criticism which is levelled at the system is that the minister has the functions both of making planning policy and of applying the policies which he has made. But that combination of functions does not necessarily give rise to unfairness. The formulation of policies is a perfectly proper course for the provision of guidance in the exercise of an administrative discretion. Indeed policies are an essential element in securing the coherent and consistent performance of administrative functions. There are advantages both to the public and the administrators in having such policies. Of course there are limits to be observed in the way policies are applied. Blanket decisions which leave no room for particular circumstances may be unreasonable. What is crucial is that the policy must not fetter the exercise of the discretion. The particular circumstances always require to be considered. Provided that the policy is not regarded as binding and the authority still retains a free exercise of discretion the policy may serve the useful purpose of giving a reasonable guidance both to applicants and decision-makers. Nor is this a point which can be made solely in relation to the Secretary of State. In a variety of administrative functions, in addition to planning, local authorities may devise and implement policies of their own."

(f) I am by no means convinced that the Minister has to date not caused or permitted the application of "TUPE principles". She is recorded on 9 December 2009 as saying:

"that in saying that the principles of TUPE should apply to the transfer of staff she meant that she hoped that TLS would act as a responsible employer and work with its staff at the time of instability to provide strong support. At the same time, if staff wanted to move to the OLC, and could demonstrate the required abilities, the OLC should give those staff preferential treatment."

I remain unconvinced that she was obviously wrong. It is not clear precisely what "TUPE principles" actually are in the context of the TUPE regulations not applying in law or in fact. It may mean that the public authority in question, here OCL or MoJ, should do or use all reasonable endeavours to do what is consistent or not inconsistent with TUPE. Thus, it may be that MoJ should use its good offices to persuade OLC to take on as many suitably qualified and experienced LCS personnel as want to go to OLC on the best terms available but with continuation of their employment for say redundancy purposes, accrued holiday entitlements and enhanced periods of notice required from the years' service they had beforehand with LCS or the Law Society. It may be that OLC should take on such people on such terms.

(g) I am unconvinced that OLC is in some way bound by COSOP or is required in law or on any other basis to apply its provisions. This is a Cabinet Office paper.

(h) Whilst it is open, I consider, for the Court to grant injunctions or to make declarations as to illegality in relation to threatened unlawful (including Wednesbury unlawful) acts or decisions by public authorities, that is unusual and it would be wholly exceptional if there is as yet (as here) no unlawful act threatened by MoJ or OLC. I was referred to Blackland Park Exploration Ltd v Environment Agency [2003] EWCA 1795 and Rolls-Royce PLC v Unite [2009] EWCA 387 to persuade me that this was a comparable case to them but the facts of those cases are so different as to not to assist.

(i) It is difficult to say that the Minister or OLC has yet done anything unlawful or Wednesbury unreasonable. Not obviously unreasonably, she encouraged OLC and LCS to try to reach an agreement which they almost did; it was only almost at the 12th hour that the Law Society, having agreed wording which was apparently acceptable to it until mid-morning on 30 November 2009, then, later that morning changed its mind for reasons which do not seem to have featured in the drafting beforehand.

(j) Whilst reliance was placed by the Law Society upon what Ms Prentice said in her letter of 16 December 2009 ("You refer to the applicability of the Cabinet Office Statement of Practice (COSOP). We accept that this is relevant. However, since the OLC will be operating an essentially new activity, it is one of the exceptions listed in paragraph 14"), it does seem clear that the exceptions in Paragraph 14 are irrelevant as these relate to "Transfers as a Result of Public Private Partnerships" of which on any count the supposed LCS/OLC transfer is not.

(k) I have very real doubts (as set out above) whether COSOP on its wording was ever intended to apply to the LCS/OLC functions and undertaking. It is difficult however on the available evidence to form a concluded view on this issue and it is currently premature to decide it.

1. It follows from the above that I will not grant any declaration as requested as to the applicability of COSOP.

**Decision and Conclusion
**86. For all the above reasons, the Law Society's claims in these proceedings are dismissed. Obviously, the Court is conscious that the position of LCS employees is precarious but I should record that both Defendants have confirmed that the terms of the agreement negotiated and provisionally agreed with the Law Society remain on the table and the Chief Executive has openly stated that OLC is very interested in recruiting from LCS; this should provide a not inconsiderable number of jobs to LCS employees.

1. The parties are agreed that costs should follow the event and that there should be interim payments on account of costs. There was some disagreement as to whether I should in the Judgement Order dismissing the Claimant's claims make declarations reflecting this Judgement. I am persuaded that it would be helpful if declarations were issued, particularly for the employees as a brief summary of what has been decided.