Appeal No. EAT/772/92

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 2 December 1994

	Before

	THE HONOURABLE MR JUSTICE HOLLAND

	MR J R CROSBY

	MR D G DAVIES

MRS J J PATERSON and MRS M D ROGERS	APPELLANTS

RUSSELL & BRAND LTD	RESPONDENTS

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR ANDREW ZIMUTO
	(OF COUNSEL)
Graham & Rose Colley
6 Bowden Street
Cleaver Square
Kennington
London    SE11

For the Respondents	MR JOSEPH HAGE
	(OF COUNSEL)
N Chronias, Legal Officer
E.E.F.
Broadway House
Tothill Street
London    SW1H 9NQ

	MR JUSTICE HOLLAND:  This is an Appeal from a decision of the an Industrial Tribunal sitting at Ashford on 22 September 1992, the decision being that the Tribunal did not have jurisdiction to proceed with the hearing of two applications for unfair dismissal on the grounds that neither applicant was employed by the Respondents for two years, as is required by Section 64(1) of the Employment Protection (Consolidation) Act 1978.

	We turn immediately to the facts giving rise to the instant problem.  The Industrial Tribunal was concerned with a social club, the Mountbatten Club that is attached to a factory belonging to the Lucas Organisation at Chatham in Kent.  The Tribunal found that the club was a social club and that it was run for the benefit of the employees of the factory.  Further, however, the Tribunal was able to find on the evidence that this club formed an entity separate from the Lucas Organisation.  In such premises, the Industrial Tribunal examined the status of the employees at the club; referring particularly to the applicants it found on the evidence, that their connection with the club arose as follows.  They are sisters and their parents were for a period of time, resident managers of the club.  Having regard to that family relationship, both applicants started to work part-time in the club from a date in or about 1970.  The Industrial Tribunal explored the subsequent history, but for our present purposes, it is largely irrelevant, because there is a clear finding by the Industrial Tribunal that both applicants were employed by the club continuously to 2 April 1990.  We interpose: the finding was that the employment was by the club, but not by Lucas.  That latter aspect is under challenge in the Notice of Appeal.  There is a contention that the employment was with Lucas, but that point has not been so far argued before us and on the facts as found by the Industrial Tribunal, the prospects for any such point do not stand out as being very good.

	We interpose further to emphasis that as at the date, 2 April 1990, an Industrial Tribunal plainly had jurisdiction over any issues then arising as to unfair dismissal, since there had been a preceding period of continuous employment exceeding two years.

	We then turn to further events.  The Industrial Tribunal further found that on 7 February 1990, Lucas Diesel Systems acting in a capacity that was not explored, entered into an agreement with the Respondents, whereby the Respondents took over the management of the club.  Pursuant to that agreement, the Respondents in due course made contracts of employment with each of the applicants so that the service pursuant to those contracts started on 2 April, the practical result being that the applicants worked in the club on an effectively continuous basis, that is they worked before 2 April under contract to the club itself and after 2 April under contract to the Respondents.  There was no apparent break at all in the service that they gave to the club.  Then finally comes 17 March 1992, when the Respondents dismissed both of these applicants.  It is in each case that dismissal which is the subject of the application to the Industrial Tribunal.

	At the hearing that is under Appeal, the issue arose as to whether the Tribunal had jurisdiction to hear the complaint on the premise that the employment with the Respondents had been continuous only since 2 April 1990 so that, as at 17 March 1992, neither applicant had been continuously in employment with the Respondents for the requisite period of two years.  In the event the Industrial Tribunal found in favour of the Respondents and it is against that finding that this Appeal is mounted.  How then to resolve the problem raised by these facts?  It is common ground that the solution is to be found in Schedule 13 Employment Protection (Consolidation) Act 1978, which Schedule is headed "Computation of Period of Employment".  For our purposes, we need only refer to two specific provisions in that Schedule: first paragraph 1(3):

	"...A person's employment during any period shall, unless the contrary is shown, be presumed to have been continuous..."

	Second and more importantly, paragraph 17(2):

	"...If a trade or business or an undertaking (whether or not it be an undertaking established by or under an Act of Parliament) is transferred from one person to another, the period of employment of an employee in the trade or business or undertaking at the time of the transfer shall count as a period of employment with the transferee, and the transfer shall not break the continuity of the period of employment..."

	Those then being the immediately relevant statutory provisions, it is plain that on a literal reading of them and in particular of 17(2), both these applicants have continuity of employment.  We are here, says the Industrial Tribunal, concerned with "a business"; thus the argument runs that a business was transferred from the club to the Respondents and the period of employment of the applicants as employees in that business at the time of the transfer should count as a period of employment with the Respondents so that the transfer should not break the continuity of that period of employment.

	For its part the Industrial Tribunal took a different view of the matter, which finding was based upon a passage in the decision of the Employment Appeal Tribunal reported as Macer v. Abafast Ltd [1990] ICR, pp 234, the judgment being given by Mr Justice Wood.  This was a case in which the essential issue was as to the meaning in the particular circumstances of the decision of the words "at the time of the transfer".  Thus, it is conceded that the passage that weighed with the Industrial Tribunal is strictly speaking obiter to the decision.  That said, reliance was placed upon it by the Respondents before the Industrial Tribunal and reliance is still placed upon it before us.  The key passage is at page 243.  There Mr Justice Wood recites the words at paragraph 17(2) and goes on:

	"...The first essential is the transfer and therefore the continuation of the business or undertaking.  The second is employment by the owner before the transfer or change of ownership and by the owner after.  The third essential is that the period of service with the former must be continuous within paragraphs 1 to 16 of Schedule 13, and likewise the period of service with the latter.  Fourthly, that the combined periods of service must satisfy the qualification period..."

	Having had that cited to it, the Industrial Tribunal dealt with the law as follows, paragraph 14 of the Reasons:

	"...If we had found that the applicants were employees of Lucas, there would be no difficulty at all.  There is, however, difficulty which arises from our finding that they were employees of the club.  It was Lucas which entered into the transaction with the respondents.  The relevant transfer, for the purposes of paragraph 17(2) was between Lucas and the respondents.  In a literal sense, the applicants were employees in the business at the time of transfer, but it is clearly the intention of the provision, and understood as such by the Employment Appeal Tribunal in Macer's case, that the employee should be an employee of the transferor.  Therefore, we are unable to find that paragraph 17(2) applied so as to benefit the applicants.  If we were wrong about that, we would find in favour of the applicants, because we do consider the club, in respect of the functions taken over by the respondent, was a "business".  The fact that it was a social club, with limited membership, and not intended to be a profit-making body, does not, in our view, prevent it being a business and run as such.  It sold food and drink, and no doubt provided entertainment from time to time.  Moreover, the provisions of the management contract, taken overall, did in fact involve a transfer of that business to the respondents.  The functions they took over had previously been exercised by the club, but with ultimate responsibility vested in Lucas.  Although the accounts were separate from the company accounts, the building was owned by Lucas and any losses that were subsidised by Lucas.  The strongest factor which compels us to this finding is that Lucas did in fact enter into the contract with the respondents, having come involved in discussions with them about a contract to manage the factory restaurant.  It must have been considered by the company that it had both the power and the responsibility to enter into such a contract for the running of the club..."

	We have to say that we are entirely satisfied that in that paragraph, the Industrial Tribunal misdirected itself as to the law.  Our reasons are as follows:

	First, we attach considerable importance to the plain words of paragraph 17 (2).  We remind ourselves that this is a provision which relates to jurisdiction and in that regard it is helpful to remind oneself of a further passage in the judgment of this Tribunal in Macer v. Abafast Ltd. [1990] ICR 234.  The judgment reads at p.244A: 

	"...	Schedule 13 does not base its rules on such a concept.  It is purely a question of calculation based upon findings of fact.  The issue to be decided is one of jurisdiction of an industrial tribunal.  It is not concerned with the contractual rights between employers and employees.  Regulation 5 (3) of the Regulations of 1981 is concerned with the contractual rights between the employer and employee, and thus its interpretation is sought by the contractual analysis."

	In view of this Tribunal, once a period of employment appropriate to give an Industrial Tribunal jurisdiction is established, then we would expect to find only plain words as appropriate to oust such jurisdiction.  In the event, ouster of jurisdiction has effectively to be the submission that was made to the Industrial Tribunal and has to be made to this Tribunal to sustain the position of the Respondents.  Second, we are satisfied that the words cited from the decision in Macer v. Abafast Ltd are not binding nor even persuasive authority for any contrary construction of paragraph 17 (2).  With every respect to that Tribunal, we cannot discern the origin of the words "the owner" to be found in the second sentence of the passage quoted.  There is nothing in paragraph 17 (2) which puts ownership as having any material application to this problem as to jurisdiction.

	Third, we prefer the guidance that we gain from Teeside Times Ltd. v. Drury [1980] ICR, pp 338 and particularly at page 356.  Here the Court of Appeal were concerned with the problem of jurisdiction.  The employee had been dismissed immediately before a transfer of the business was effected.  He was thereupon re-engaged by the transferees only to be dismissed by them some three days later.  Thus it was that the Industrial Tribunal, the Employers Appeal Tribunal and finally the Court of Appeal, were respectively concerned with the position "as at the time of the transfer".  One aspect of concern was as to whether at that time the applicant was an employee in the business.  If it was necessary for him to be an employee of the transferor at that moment in time, then there was no jurisdiction.  If, on the other hand, if proper construction of 17(2) meant that he only needed to be an employee in the business at the material time, then the Industrial Tribunal had jurisdiction.  With those words of introduction, we go the judgment of Eveleigh L.J. and we cite the opening passages starting at 356 C:

	"...	A continuous period of employment with an employer forms the basis of an employee's right to claim from the employer in respect of unfair dismissal and redundancy.  The intention of Parliament as revealed by paragraphs 9 and 10 of Schedule 1 to the Contracts of Employment act 1972 is that an employee shall be able to take with him in his service with a new employer his period of employment concluded in accordance with the Schedule which he has earned during his service with the previous employer when the former can be said to have stepped into the shoes of the latter.  In the cases envisaged by the Schedule it would not be right for an accrued period of employment to lose all value as could be the case if, in particular, an employee's services were transferred before he had accumulated the necessary number of weeks to qualify initially for benefit under the legislation.

		Counsel for the employers would have us say that the words in paragraph 9(2), "the period of employment of an employee in the trade or business or undertaking at the time of the transfer", are to be read as "the period of employment of an employee who is employed by the transferor in the trade... at the precise moment that transfer is effected."  It seems to me that while such an interpretation would not strain the language of the paragraph, another interpretation would be equally valid, namely, "the period of employment of an employee in the trade...which is vested in him at the time of transfer."  I would prefer the second interpretation, for the following reasons.  First the whole of the schedule is primarily concerned with computation of period of employment and it is upon period of employment that the emphasis is placed.  That being so, the words of paragraph 9(2) are indicating that there shall be counted as a period of employment with the transferee the employee's period of employment "at the time of the transfer."  Secondly if it was intended that the employee should actually be employed in the undertaking at the very moment when it was transferred, I would have expected this to be made clear.  Thirdly, so narrow and strict an interpretation would make it easy for an employer to defeat the employee's interest which paragraph 9, in all of its sub-paragraphs, is anxious to maintain.  Fourthly, in all of the other sub-paragraphs the emphasis is upon the period of employment, as at a given time, which is to be carried forward and not upon the actual relationship of employer and employee being ascertained as at a given time.  Sub-paragraph (3) speaks of "the employer's period of employment at the time when the modification takes effect.".  Sub-paragraph (4) says "the employee's period of employment at the time of the death."  Sub-paragraph (5) refers to "the employee's period of employment at the time of the change."  So also in paragraph 10 (1) we see "his period of employment at that time."  In some cases that time may coincide with the actual change from the employment with one employer to employment with another.  It will not necessarily be so, in my opinion.  There will in many cases be uncertainty for a while as to an employee's status; for example, on the death of the employer.  How and when is the employee "taken into the employment of the personal representatives or trustees of the deceased?"  Contracts of employment being personal, cannot be transferred automatically upon an event.  They cannot go with the business.  Legally binding agreements are necessary either to terminate the first employment or to create the second, or both, depending upon the circumstances.."

	For our part, we have found those passages of considerable assistance; they have encouraged us to remain with the plain words of 17(2).  Thus it is, we unhesitatingly find that that sub-paragraph is concerned with the period of employment in the business that is vested in an applicant at the time of the transfer.  That being the case, we are entirely satisfied that that sub-paragraph operated to achieve continuity of employment in the particular circumstances of this case.  Each applicant had as at 2nd April, in the words of Lord Justice Eveleigh, a period of employment invested in her.  That period of employment having invested in her at the time of the transfer the statute provided for it to continue so soon as the transfer of the business to the Respondents was effected.  Thus for those reasons, we are entirely satisfied that the Industrial Tribunal mis-directed itself as to law with respect to this preliminary issue as to jurisdiction.

Before departing from this matter, we wish to make two further points.  First, if we had thought there was merit in the argument raised by the Respondents, that is merit as to law, then we would still have been concerned to hear argument as to whether this matter should not be sent back to the Industrial Tribunal for further findings as to fact.  Let it be accepted that Lucas were not the employers of the applicants, then the question arises as to whether they were not acting on behalf of the employers of the applicants when they made this agreement on 7th February 1990.  What we ask, rhetorically, was the relationship between the employers of the applicants and Lucas as at that date, which enabled Lucas to effect the transfer of that business to the Respondents?  We accept that the present findings of the Industrial Tribunal do not deal with this particular issue, presumably because it was not a point that was raised before them for their deliberation, but manifestly if the construction contended for by the Respondents had appealed to us, then in turn we would have been concerned to have a better examination of the factual basis which resulted in the transfer of the business.

	The second point that we wish to make is as follows.  In the course of argument, this Tribunal was invited to contemplate the plight of the Respondents in taking on employees with, as found, vested periods of employment.  It is within the experience of two members of this Tribunal, that this problem is frequently encountered and that the way in which it is often dealt with is by inclusion of appropriate terms in the contract negotiated between the transferor and the transferee.

	Turning then to the disposal of this matter, we allow this Appeal, we remit the case to the Industrial Tribunal with a declaration that it has the jurisdiction to continue this hearing.