Rynda (UK) Limited v Rhijnsburger  EWCA Civ 75
Appeal against a decision, which was upheld by the EAT, that the claimant's employment automatically transferred to it under the Transfer of Undertakings (Protection of Employment) Regulations 2006. Appeal dismissed.
The claimant's employment transferred to the respondent following a series of transfers. She was dismissed less than a year after the final transfer and therefore had to prove that there was a relevant transfer so that her service prior to the transfer counted towards her continuous service. The ET found that the claimant had been assigned to an organised grouping of employees (even though she was the sole employee in that grouping), that her 'principal purpose' was to carry out the activities to be transferred 'immediately before the transfer' and that it was not a temporary arrangement. Her assignment had been a conscious decision of the employer and had not occurred through happenstance. The EAT upheld the decision and the respondent appealed to the Court of Appeal.
The court dismissed the appeal. The employment tribunal and the Employment Appeal Tribunal were correct. The claimant, although a single employee, did constitute such an "organised grouping" within the meaning of the regulation. The fact that between October 2009 and early March 2010 the claimant had spent a lesser part of her time managing certain properties in Germany did not affect the position.
Case No: A2/2013/2928
Neutral Citation Number:  EWCA Civ 75
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
Royal Courts of Justice
Strand, London, WC2A 2LL
LORD JUSTICE JACKSON
LORD JUSTICE KITCHIN
LORD JUSTICE FLOYD
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RYNDA (UK) LIMITED (Appellant)
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Mr Adam Solomon (instructed by Russell-Cooke LLP) for the Appellant
Mr Aidan Briggs (instructed by Lyons Davidson Solicitors) for the Respondent
Hearing date: 22nd January 2015
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JudgmentLord Justice Jackson:
- This judgment is in seven parts, namely:
Part 1. Introduction Paragraphs 2 to 4
Part 2. The facts Paragraphs 5 to 17
Part 3. The present proceedings Paragraphs 18 to 24
Part 4. The appeal to the Court of Appeal Paragraphs 25 to 30
Part 5. The law Paragraphs 31 to 45
Part 6. Decision Paragraphs 46 to 57
Part 7. Executive summary and conclusion Paragraphs 58 to 60
- This is an employer's appeal against a decision that the claimant's employment automatically transferred to it under the Transfer of Undertakings (Protection of Employment) Regulations 2006. I shall refer to those regulations as the "TUPE Regulations" or "TUPE". The issue in the appeal is whether, on the facts found by the employment tribunal, the claimant constituted an "organised grouping of employees" falling with regulation 3 (3) (a) (i) of TUPE.
- The TUPE Regulations, so far as relevant, provide:
- (1) In these Regulations —
"assigned" means assigned other than on a temporary basis;
references to "organised grouping of employees" shall include a single employee;
"relevant transfer" means a transfer or a service provision change to which these Regulations apply in accordance with regulation 3 and "transferor" and "transferee" shall be construed accordingly and in the case of a service provision change falling within regulation 3(1)(b), "the transferor" means the person who carried out the activities prior to the service provision change and "the transferee" means the person who carries out the activities as a result of the service provision change;
A relevant transfer
- (1) These Regulations apply to —
(a) a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity;
(b) a service provision change, that is a situation in which —
(i) activities cease to be carried out by a person ("a client") on his own behalf and are carried out instead by another person on the client's behalf ("a contractor");
(ii) activities cease to be carried out by a contractor on a client's behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by another person ("a subsequent contractor") on the client's behalf; or
(iii) activities cease to be carried out by a contractor or a subsequent contractor on a client's behalf (whether or not those activities had previously been carried out by the client on his own behalf) and are carried out instead by the client on his own behalf, and in which the conditions set out in paragraph (3) are satisfied.
(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.
(3) The conditions referred to in paragraph (1)(b) are that —
(a) immediately before the service provision change —
(i) there is an organised grouping of employees situated in Great Britain which has as its principal purpose the carrying out of the activities concerned on behalf of the client;
(ii) the client intends that the activities will, following the service provision change, be carried out by the transferee other than in connection with a single specific event or task of short-term duration; and
(b) the activities concerned do not consist wholly or mainly of the supply of goods for the client's use.
Effect of relevant transfer on contracts of employment
- (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."
- Having set out the relevant provisions of TUPE, I must now turn to the facts.
- Rynda Capital Partners Europe LLP owns a large portfolio of properties across Europe (known as the "H20 properties") through a somewhat complicated corporate structure. The subsidiary companies which own the H20 properties in the Netherlands are known as "H20 Amsterdam" and "H20 Dutch". Other subsidiary companies own H20 properties in France, Germany, Denmark and Finland. I shall refer collectively to Rynda Capital Partners Europe Ltd and its subsidiaries as "the Rynda Group".
- In May 2009 the various subsidiary companies entered into management agreements with Drivers Jonas LLP ("Driver Jonas") under which Drivers Jonas agreed to manage all the H20 properties. In relation to the Dutch properties Drivers Jonas entered into management agreements with H20 Amsterdam and H20 Dutch.
- In May 2009 Drivers Jonas engaged the claimant on a six month fixed term contract to manage the H20 properties in the Netherlands. Drivers Jonas were satisfied with the standard of the claimant's work. Accordingly they offered her permanent employment at the end of the six month term.
- On the 1st October 2009 the claimant commenced employment with Drivers Jonas as an Associate, Asset and Property Management, Europe Group. In her new role the claimant continued managing the H20 properties in the Netherlands. She also took on some responsibility for managing the H20 properties in Germany. In the case of the German properties there were other staff in place who were providing management services. In the case of the Dutch properties, no-one other than the claimant carried out any management work. There was a plan to bring in someone to assist the claimant with the Dutch properties, but that plan never materialised. As a result the claimant devoted most of her working time to dealing with the Dutch properties.
- In early March 2010 the claimant became ill. This was partly because of the pressure of taking on additional work in Germany, whilst receiving no assistance on the Dutch portfolio.
- In late March 2010 the claimant returned to work. This was an eventful period. Drivers Jonas was preparing to merge with Deloitte LLP. The claimant discussed her position with the head of her department. It was agreed that the claimant would stop working on the German properties until there was further clarity about the merger and about what this meant for the European business. The position in late March, therefore, was that the claimant was solely responsible for managing the Dutch H20 properties.
- On 1st April 2010 the merger took place. Drivers Jonas LLP joined forces with Deloitte LLP to form a new firm known as Drivers Jonas Deloitte LLP ("DJD"). Pursuant to the provisions of TUPE the claimant's employment was transferred to DJD.
- Between 1st April 2010 and 31st December 2010 DJD employed the claimant as Associate, Asset & Property Management, Europe Group. The claimant was responsible for managing the H20 properties in the Netherlands. The claimant had no duties other than managing such properties. No-one assisted the claimant in carrying out that work. She was in effect a one-person department operating within DJD.
- One consequence of the merger was that the new firm, DJD, had no responsibility for managing the H20 properties in France and Germany. This was because in those jurisdictions there were legal restrictions upon auditors being involved in property management. Also there was staff opposition to any suggestion that DJD or its associated companies should be involved in managing the French or German properties. Accordingly, as from 1st April 2010 there was no possibility that the claimant's role might be expanded to include the German properties.
- In the autumn of 2010 DJD decided to withdraw from managing the H20 properties altogether and notified the Rynda Group of that decision. The Rynda Group decided that one of its subsidiary companies, namely Rynda Real Estate Asset Management Ltd, should take over that function. That company has subsequently changed its name to Rynda (UK) Ltd. In order to avoid confusion I shall refer to it at all stages of the story as "REM".
- The transfer of functions between DJD and REM took place at the end of 2010. As part of that transfer the claimant moved across from DJD to REM. The 31st December 2010 was the last day of the claimant's employment with DJD. On 1st January 2011 the claimant commenced her employment with REM as a senior asset manager. She continued to do precisely the same job as before. She managed the H20 properties in the Netherlands. The claimant was told that there was a prospect of career development over the medium term depending on her aspirations and the future success of REM. In the event that career development did not take place.
- Unfortunately issues arose between the claimant and her managers. On 2nd September 2011 REM dismissed the claimant from its employment.
- The claimant was aggrieved by REM's decision. Accordingly she commenced the present proceedings.
- By a claim form issued in the London Employment Tribunals the claimant claimed against REM compensation for unfair dismissal. The claimant contended in her claim form that her period of employment had commenced on 19th May 2009. She contended that her employment had transferred from DJD to REM on 1st January 2011 pursuant to the TUPE Regulations.
- REM defended the claim on a number of grounds. In particular REM contended that the claimant's employment had commenced on 1st January 2011. REM denied that the claimant's employment had automatically transferred to itself under TUPE.
- The question whether the TUPE Regulations applied was dealt with as a preliminary issue at a hearing before Employment Judge Grewal on 22nd March 2012. The employment judge heard oral evidence from the claimant in support of her claim and from Mr Michael Walton on behalf of REM.
- The employment judge handed down her reserved judgment in writing on 24th May 2012. She held that there had been a relevant transfer of the claimant's contract of employment from DJD to REM on 1st January 2011 pursuant to regulations 3 and 4 of TUPE.
- I would summarise the employment judge's reasoning as follows:
i) Between May 2009 and 31st December 2010 the claimant was the only employee at Drivers Jonas and DJD responsible for managing the H20 properties in the Netherlands.
ii) For the purposes of regulation 3 (3) (a) (i) of TUPE the claimant constituted "an organised grouping of employees", which had as its principal purpose the carrying out of that property management activity on behalf of the client.
iii) The fact that between October 2009 and early March 2010 the claimant assumed some responsibility for the H20 German properties does not undermine the conclusion in sub-paragraph (ii). During that period she devoted the majority of her working time to the H20 Dutch properties.
iv) When the claimant returned to work in late March 2010 after her sick leave, she was working solely on the Dutch H20 properties. The fact that the claimant's future role was going to be reviewed makes no difference. In the event, following the merger with Deloitte LLP, the claimant's role remained the same, namely managing the H20 properties in the Netherlands.
v) In those circumstances there was a service provision change falling within regulation 3 (1) (b) (ii) of TUPE. Accordingly, pursuant to regulation 4 (1) of TUPE there was a relevant transfer of the claimant's employment from DJD to REM on 1st January 2011.
- REM appealed to the Employment Appeal Tribunal against that decision. Mr Recorder Luba QC heard the appeal on 14th May 2013. He handed down his reserved judgment on 9th September 2013, dismissing the appeal. Essentially the recorder approved and adopted the reasoning of the employment tribunal judge.
- REM is aggrieved by the decisions of the employment tribunal and the Employment Appeal Tribunal. Accordingly it now appeals to the Court of Appeal.
- By an appellant's notice dated 14th October 2013 REM appealed to the Court of Appeal against the decision of the Employment Appeal Tribunal on two grounds.
- The first ground of appeal is that the employment tribunal erred in paragraph 27 of its decision in assuming that the claimant constituted an "organised grouping". The employment tribunal erred in proceeding straight to the question whether the claimant's principal purpose was managing the H20 Dutch properties.
- The second ground of appeal is that the employment tribunal and the Employment Appeal Tribunal erred in holding that this case fell within regulation 3 (3) (a) (i) of TUPE. They wrongly focused on the work which the claimant happened to be doing. The employment tribunal should have followed the approach of Underhill J in Eddie Stobart Ltd v Moreman  IRLR 356.
- The appeal came on for hearing on 22nd January 2015. Mr Adam Solomon appeared for REM, although he had not been involved in the earlier hearings. Mr Aidan Briggs appeared for the claimant, as he had done both in the employment tribunal and the Employment Appeal Tribunal. I am grateful to both counsel for their excellent and concise submissions.
- There is much overlap between the first and second grounds of appeal. Most of counsel's competing arguments revolve around the operation of regulation 3 (3) (a) (i) of TUPE and how it impacts upon the facts of this case.
- Before grappling with these arguments, I must first review the law.
- The rules relating to service provision change first appeared in 2006. They did not feature in earlier versions of the TUPE Regulations.
- The two authorities which are of principal importance for present purposes are Eddie Stobart Ltd v Moreman  IRLR 356 and Seawell Ltd v Ceva Freight (UK) Ltd  CSIH 59;  IRLR 726.
- In Eddie Stobart the employer ("ES") provided warehousing and transport services from its premises at Manton Wood for two clients in the meat trade, Forza and Vion. ES had 35 employees, some of whom worked on the nightshift and some on the dayshift. Because of the times at which Forza and Vion placed their respective orders, ES's nightshift employees worked principally on tasks required by Forza; ES's dayshift employees worked mainly on tasks required by Vion.
- Another logistics business, FJG, took over the work of warehousing and transporting meat for Vion. ES maintained that these events constituted a service provision change within regulation 3 (1) (b) of TUPE. FJG refused to take onto its staff the dayshift employees of Vion. Thus those employees were left without work. They made claims for unfair dismissal. The issue arose as to whether their claims lay against ES or FJG.
- Both the employment tribunal and the Employment Appeal Tribunal held that ES was responsible for the unfair dismissal claims. Regulation 3 (1) (b) of TUPE did not apply, because the dayshift employees of ES were not an "organised grouping of employees" falling within the definition contained in regulation 3 (3) (a) (i).
- Underhill J, giving the judgment of the Employment Appeal Tribunal, neatly summarised his reasoning in paragraph 18 as follows:
"Taking it first and foremost by reference to the statutory language, regulation 3 (3) (a) (i) does not say merely that the employees should in their day-to-day work in fact (principally) carry out the activities in question: it says that carrying out those activities should be the (principal) purpose of an 'organised grouping' to which they belong. In my view that necessarily connotes that the employees be organised in some sense by reference to the requirements of the client in question. The statutory language does not naturally apply to a situation where, as here, a combination of circumstances – essentially, shift patterns and working practices on the ground – mean that a group (which, NB, is not synonymous with a 'grouping', let alone an organised grouping) of employees may in practice, but without any deliberate planning or intent, be found to be working mostly on tasks which benefit a particular client. The paradigm of an 'organised grouping' is indeed the case where employers are organised as 'the [Client A] team', though no doubt the definition could in principle be satisfied in cases where the identification is less explicit."
- In Seawell Ltd v Ceva Freight (UK) Ltd, Seawell operated platforms in the North Sea. Ceva arranged for the movement of goods and materials to those platforms. Ceva provided similar services for other customers. Ceva's work for Seawell fell into two parts. First, it received into its warehouse goods and materials purchased by the customer (the "inbound" operation). Secondly, it arranged for the shipment of the goods and materials to their intended destination (the "outbound" operation).
- Mr Moffat was employed by Ceva as a logistics co-ordinator. He spent all, or almost all, of his working time looking after the needs of Seawell, particularly in respect of the supply of outbound goods to the Noble Platform in the North Sea. Mr Moffat's line manager spent about 20% of his working time on the Seawell account. Two of Ceva's warehousemen spent between 20% and 30% of their time on Seawell's business.
- With effect from 1st January 2010 Seawell took the whole of these operations back into their own management. Ceva had no further need for Mr Moffat's services. Ceva ceased to employ Mr Moffat after 31st December 2009, maintaining that his employment had automatically transferred to Seawell under regulations 3 and 4 of TUPE. Seawell denied that TUPE applied and refused to take Mr Moffat into their employment. Mr Moffat made a claim for unfair dismissal against both companies, leaving the tribunal to decide which company was liable.
- The employment tribunal held that Mr Moffat constituted an "organised grouping of employees", which had as its principal purpose the carrying out of the activities required by Seawell. Therefore there had been a service provision change falling within regulation 3 (1) (b) (iii) of TUPE. The Employment Appeal Tribunal reversed that decision on the ground that Mr Moffat formed part of a group of employees; that group of employees did not have as its principal purpose the carrying out of activities on behalf of Seawell. Ceva appealed to the Inner House of the Court of Session.
- The Court of Session dismissed Ceva's appeal and upheld the decision of the Employment Appeal Tribunal. Lord Eassie, delivering the opinion of the court, expressed agreement with paragraph 18 of Underhill J's judgment in Eddie Stobart (quoted above). He held that the concept of an "organised grouping" implied that there was an element of conscious organisation by the employer of his employees into a grouping – of the nature of a team – which had as its principal purpose the carrying out of the identified activities. A number of employees in addition to Mr Moffat participated in the activities required by Seawell. It could not be said that those employees formed an "organised grouping" having as their principal purpose the carrying out of activities for Seawell. The mere fact that one of those employees, Mr Moffat, spent all of his time working on behalf of Seawell did not bring the case within regulation 3 of TUPE.
- In order to explain how a single employee might constitute an "organised grouping", as envisaged by regulation 2 (1) of TUPE, Lord Eassie gave two examples: first, a single cleaner provided by a cleaning firm to its client; secondly, a single solicitor within a firm working full-time for an insurance client.
- Eddie Stobart and Seawell are the two authorities of greatest assistance for present purposes. I also take into account, however, helpful dicta of Lady Smith in Argyll Coastal Services Ltd v Stirling (15th February 2012) UKEATS/0012/11/B and Edinburgh Home-Link Partnership v The City of Edinburgh Council (10th July 2012) UKEATS/0061/11/B1. At paragraph 46 of Argyll and paragraph 19 of Edinburgh Lady Smith stated that not every employee who carried out work for the client should be considered. For example, an employee assisting on a temporary basis or covering for an absent colleague would not be relevant to the analysis.
- I would summarise the principles which emerge from the authorities as follows. If company A takes over from company B the provision of services to a client, it is necessary to consider whether there has been a service provision change within regulation 3 of TUPE. The first stage of this exercise is to identify the service which company B was providing to the client. The next step is to list the activities which the staff of company B performed in order to provide that service. The third step is to identify the employee or employees of company B who ordinarily carried out those activities. The fourth step is to consider whether company B organised that employee or those employees into a "grouping" for the principal purpose of carrying out the listed activities.
- Having reviewed the authorities and identified the relevant principles, I must now reach a decision in the present case.
- In relation to the Dutch properties REM had two clients, namely H20 Amsterdam and H20 Dutch. The service which REM provided to those two companies was managing all the properties which they owned in the Netherlands. The activities which REM performed in order to provide that service comprised (i) administrative tasks at REM's London office and (ii) periodic trips to the Netherlands in order to visit the H20 properties.
- The claimant was the employee who undertook all of the activities in connection with the Dutch H20 properties. The claimant did some of her work at the London office and some of her work during trips to the Netherlands. The claimant devoted all of her time to those activities. No other employee of REM provided any significant degree of assistance to the claimant in the performance of that role.
- Regulation 2 (1) of TUPE states that, for the purposes of the Regulations, a single employee may constitute an "organised grouping of employees". In my view this is a case (similar to the examples given by Lord Eassie in Seawell at ) in which a single employee, namely the claimant, did constitute an "organised grouping of employees". The employer, REM, specifically instructed the claimant to carry out all of the activities which were necessary to provide the services required by H20 Amsterdam and H20 Dutch. Accordingly the claimant fell within the ambit of TUPE regulation 3 (3) (a) (ii). I reach this conclusion both on the basis of the express words of the regulations and also on application of the principles derived from the authorities, as set out in Part 5 above.
- Let me now turn to the specific arguments deployed by Mr Solomon on behalf of REM. As to the first ground of appeal, it is fair comment that the issue addressed in paragraph 27 of the employment tribunal's judgment is not the only issue in the case. Nevertheless, undoubtedly one question which the tribunal had to address was how the claimant spent her working hours and what she was doing.
- In paragraphs 28 to 32 the employment tribunal judge examined the claimant's role at different stages of her employment. The employment tribunal judge noted that between May and October 2009 the claimant was only engaged upon managing the Dutch H20 properties. Between October 2009 and early March 2010 the claimant spent most of her time managing the Dutch H20 properties, but she also spent some time managing the German H20 properties. In late March 2010 the claimant's role was reduced, so that she only managed the Dutch H20 properties. That remained the position after the merger on 1st April 2010. Between April and December 2010 the claimant, as an employee of DJD, was only engaged upon managing the Dutch properties. This narrative history, which the employment tribunal judge set out at paragraphs 28 to 32 of her judgment, is directly relevant to the issues which the tribunal had to decide.
- There remains the question, correctly identified by Mr Solomon, as to whether it was a matter of happenstance that the claimant was managing properties for H20 Amsterdam and H20 Dutch, or whether this was something which the employer had organised. The answer is that at each stage of the narrative the employer decided which client the claimant should work for. In late March 2010 Drivers Jonas decided that, pending review, the claimant should only manage the Dutch properties. Following the merger on 1st April 2010 DJD, the claimant's new employer, decided that the claimant should work on the Dutch properties on a permanent basis. DJD assigned no-one to assist the claimant and assigned no other work to the claimant. In other words the employer organised the claimant to work full time for H20 Amsterdam and H20 Dutch, with no significant assistance from any other employee. Therefore the employment tribunal judge was correct to conclude that the claimant was an "organised grouping of employees" to which TUPE regulation 3 (3) (a) (i) applied.
- This case differs from Eddie Stobart in critical respects. In Eddie Stobart it was a matter of fortuity that Vion always placed its orders at such a time that the dayshift dealt with them. In the present case there was no similar external circumstance or fortuity which caused the claimant always to be working for H20 Amsterdam and H20 Dutch. It was a positive decision of the employer which created this situation.
- This case also differs critically from Seawell. In Seawell Mr Moffat was part of a team whose members (with the exception of himself) spent most of their time working for customers other than Seawell. In the present case the claimant was doing work for H20 Amsterdam and H20 Dutch. She was not part of a team which delivered services to other clients. No other employee assisted the claimant in managing the Dutch properties.
- I agree with Mr Solomon that the employment tribunal judge could have set out this aspect of the reasoning more fully. Nevertheless the conclusion which she reached is correct and flows inevitably from her findings of fact.
- The second ground of appeal is that the employment tribunal erred in determining that the claimant was assigned to an organised grouping of employees, which had as its principal purpose the carrying out of activities on behalf of the client. This ground of appeal traverses the same terrain as the first ground and I reject it for the same reasons.
- Mr Solomon urged upon the court that it is not enough that an employee spends all of his/her time working on behalf of a particular client. In order to satisfy the requirements of TUPE regulation 3 (3) (a) (i) there must be deliberate planning or intent by the employer to organise the employee(s) to meet the requirements of the client. I see the force of that argument. On the other hand, in this case there was deliberate planning or intent on the part of the employer. First Drivers Jonas, then DJD specifically decided and instructed that the claimant alone should manage the Dutch H20 properties.
- In the result both the employment tribunal and the Employment Appeal Tribunal were correct to conclude that the claimant constituted an "organised grouping of employees" to whom TUPE regulation 3 (3) (a) (i) applied. Therefore a service provision change occurred pursuant to regulation 3 (1) (b) (ii) on 1st January 2011.
- The claimant was employed first by Drivers Jonas LLP and then by Drivers Jonas Deloitte LLP to manage properties in the Netherlands owned by subsidiaries in the Rynda Group of companies. On 1st January 2011 a company referred to as "REM" took over that work and the claimant became an employee of REM. REM subsequently dismissed the claimant. The issue arose as to whether the claimant's employment had transferred from Drivers Jonas Deloitte LLP to REM on 1st January 2011 under the provisions of the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"). The employment tribunal and the Employment Appeal Tribunal held that it did transfer.
- REM now appeals against that decision on the basis that the claimant was not an "organised grouping of employees", which had as its principal purpose the carrying out of activities on behalf of the client within regulation 3 (3) (a) (ii) of TUPE. In my view the employment tribunal and the Employment Appeal Tribunal were correct. The claimant, although a single employee, did constitute such an "organised grouping" within the meaning of the regulation. The fact that between October 2009 and early March 2010 the claimant had spent a lesser part of her time managing certain properties in Germany does not affect the position.
- If my Lords agree, this appeal will be dismissed.
Lord Justice Kitchin:
- I agree.
Lord Justice Floyd:
- I also agree.
Published: 13/02/2015 22:24