Appeal No. EAT/1067/94

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 17th May 1995

	Before

	THE HONOURABLE MR JUSTICE MUMMERY (P)

	MS S R CORBY

	MR K M YOUNG CBE

TOPSIDE GROUP LTD	APPELLANTS

(1) G HOLMES	RESPONDENTS
(2) TOPSIDE ALUMINIUM SYSTEMS LTD (IN LIQUIDATION)

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR M O'NEILL
	(of Counsel)
Newbys
45 Albert Road
Middlesborough
Cleveland
TS1 1PT

For the 1st Respondent	MR P CAPE
(of Counsel)
David Gray and Company
Old County Court
56 Westgate Road
Newcastle-upon-Tyne
NE1 5XU

For the 2nd Respondents 	NO APPEARENCE BY OR 	ON BEHALF OF THE 2ND 	RESPONDENTS

	MR JUSTICE MUMMERY (PRESIDENT):   This is an appeal from the Industrial Tribunal held at Middlesborough, the Chairman sitting alone, on 12th September 1994. The case was between the Applicant, Mr Geoffrey Holmes, and his former employers Topside Aluminium Systems Ltd. Because of the procedural complications in this case it is not possible to understand the grounds of appeal, and the arguments presented on it without examining the history of this dispute.

	The position was this. Mr Holmes was employed as a foreman fabricator by Topside Aluminium Systems Ltd. He had been in employment since September 1986. He was dismissed for redundancy on 21st January 1994. The circumstances in which he was dismissed led him to take his case to the Industrial Tribunal on 2nd April 1994. He complained of unfair dismissal. 

	The case set out in his application was that Topside Aluminium Systems Ltd were in the business of manufacturing and installing large aluminium frames for windows in commercial premises. It is part of a group of companies. That group includes Topside Cunliffe Engineering, which is involved in precision engineering; Topside Modules Engineering, which manufactures living accommodation for offshore installations. Although it is not mentioned in his originating application, it is not now in dispute and has not been at any material time, that there is yet another company, which now features prominently in this dispute called Topside Group Ltd, the holding company.

	In his complaint Mr Holmes said that in February 1993, the new manager, a Mr Hodgkinson, announced that there would be redundances. He received a letter saying that he would be made redundant on 19th March 1993. He was not made redundant at that time. He continued to work. 

	Nothing more was said about redundancies until 17th January 1994 when Mr Hutchinson, a Director of Topside Aluminium Systems Ltd and later a director of Topside Group Ltd, told him that there were cash shortages and that he would be made redundant. On 19th January he received a letter stating that he had been made redundant from that Friday, 21st January 1994. He was paid a redundancy payment, but no money in lieu of notice.

	He says that a couple of weeks after he left, he discovered that two people had been taken on in his old department. He raised this question with Mr Hutchinson in the middle of February. He admitted to employing these people, and he said that Mr Hutchinson told him "that he had done so as he could not afford to pay Mr Holmes £6.44 an hour when he had taken on two men at £5.27 an hour."

	Those were the circumstances in which Mr Holmes had been dismissed. He said that he did not consider that there was a genuine redundancy situation. A new contract had recently been obtained by the company and two employees had been taken on in his position shortly after his dismissal. There was no consultation. There was no offer to him of other jobs either within the Company, Aluminium Systems Ltd, or in the group of companies.

	On 31st March 1994, Topside Aluminium Systems Ltd went into creditors voluntary liquidation. We have a copy of the resolution, putting the Company into liquidation. The resolution was passed appointing a Mr L H Gatoff of Touche Ross & Co to be the Liquidator. He knew about the proceedings against the Company in liquidation. He decided not to contest them. The result of his decision was that no Notice of Appearance was put in and a hearing took place before the Industrial Tribunal in Middlesborough, with the Chairman sitting alone, on 11th July 1994. The decision of the Tribunal was that Mr Holmes had been unfairly dismissed. An order was made for the case to be re-listed on a Remedies hearing, because Mr Holmes had requested re-instatement. Extended reasons for the decision were notified to the parties on 27th July 1994. Mr Speker, the Chairman, in the extended reasons, stated that he had received a letter from Touche Ross, stating that Mr Gatoff had been appointed Liquidator. He said that no one had attended to represent Topside Aluminium Systems Ltd at the hearing.

	The extended reasons set out the matters of which Mr Holmes complained in his originating application. The decision referred to the submission made by Mr Struthers of the Citizens Advice Bureau on Mr Holmes behalf that there was no genuine redundancy situation, no warning, no consultation, no objective criteria for selection for redundancy and no offers of alternative employment. In the light of those matters the Tribunal look correctly at Section 57 of the Employment Protection (Consolidation) Act 1978 and to the definition of redundancy in Section 81 of the Act. The Tribunal came to the conclusion that the dismissal was unfair, because the Tribunal was not satisfied that redundancy was the true reason for termination. The Tribunal stated in paragraph 4:

		"From the evidence it appears that the applicant's employment was terminated in order to save the respondent money. ... The Tribunal is not satisfied, therefore, that the employer has established that redundancy was the principal reason for termination of employment."

The Tribunal also decided that the dismissal was procedurally unfair. Established principles relating to warnings, consultation, the application of objective criteria and efforts to find alternative employment had not been followed.

	The conclusion was that there was unfair dismissal. The representative of Mr Holmes said that he wished to have "re-instatement". The Tribunal considered the relevant provisions relating to the re-instatement in Section 69, but said there was insufficient information  before the Tribunal to consider whether such an order should be made. The hearing was therefore adjourned for that question to be dealt with.

	Important events occurred between the adjourned hearing remedies hearing and the making of the decision on liability for unfair dismissal.

	On 8th August 1994 a letter was written by Mr Struthers of the Citizens Advice Bureau on Mr Holmes's behalf, to the Tribunal office in Newcastle saying:

		"We hereby apply for the originating application to be amended in the following respects:-

		1)	Para. 4 be amended to add the name of:

				Topside Group Ltd
				5 Royce Avenue
				Cowpen Lane Industrial Estate
				BILLINGHAM
				Cleveland
				Tel. (0642) 566611

		2) The Statement in Support of Application be amended to include new clauses 8 and 9.

				8.	The business of the first Respondents was carried on by them until the 31 March 1994 when it was transferred to the second Respondent, Topside Group Limited, who at all times had acted as the holding company of the first Respondent.

				9.	The transfer of the business from the first Respondent to the second Respondent amounted to a transfer of undertakings.

		We claim that the addition of the third party after the limitation period has expired is justified on the following grounds:-

			(i)	Topside Group Limited were the holding company of Topside Aluminium Systems Ltd and so should have known about the proceedings taken against their subsidiary company.

			(ii)	The Applicant was not aware that the business of Aluminium Fabrications was being carried out by anyone until 8 July 1994.

			(iii)	We wrote to the liquidators of Topside Aluminium Systems Ltd asking them whether the work formerly carried out by Topside Aluminium Systems Ltd was being carried out by any other organisation. They replied on the 27 July without fully answering this question. However, they did inform us that the other two companies in the group, Topside Cunliffe Engineering Ltd and Topside Module Engineering Ltd has both ceased trading on 31st March. They also stated. "The holding company, Topside Group Limited, continues to trade, but I am unable to state what type of work is carried out by this organisation." On the 8 August, our Mr Struthers telephoned the topside Group and was told that they were carrying out the work that was formerly carried out by Topside Aluminium Systems Ltd."

			[The letter concluded:]

		If our amendment is agreed to, we further request that the remedies hearing be postponed pending the hearing against the second respondent."

	The Industrial Tribunal then sent a letter to Topside Group enclosing the letter of 8th August. Topside Group solicitors, Newbys, replied to the Industrial Tribunal on 24th August 1994 saying:

		"Our instruction are that these are the only papers that our client has relating to this matter and for which the Respondents are currently Topside Aluminium Systems Limited.

		We understand that there is to be a Remedies Hearing and shall be grateful if you will kindly let us have:

		1.	A copy of the originating application

		2.	A copy of the Notice of Appearance filed by the Respondents

		3.	A copy of the decision

		We assume that the Remedies Hearing has not yet been fixed and look forward to hearing from you as soon as possible."

	The Industrial Tribunal sent some papers to the solicitors. By the time the solicitors replied on 7th September 1994, they had been notified that there was a Remedies Hearing on 12th September 1994. They say that:

		"This was the first notice of this hearing and indeed the first notice of this matter. Neither we nor our clients are able to attend (the writer is on holiday that week).

		In any event, the claims made by the Applicant through his representative in his letter dated 8th August 1994, require detailed consideration."

The letter sets out submissions as to why the application to join Topside Group Ltd should not be allowed, it said that:

		"... they [had] received no notice of these proceedings.  All documentation presumably had been sent to the Liquidator. It will be submitted that the Applicant was aware that in April of this year our clients purchased contracts from the Liquidator of the respondent company and there was no reason why an application  could not have been made at that stage to have our clients [Topside Group] added as Second Respondents."

	It was denied that there was a transfer of undertaking. They did not have full instructions, but understood that it would be submitted that contracts had been purchased from the Liquidator on 1st April 1994 and that there had been a taking over contracts of certain employees who had been re-employed by the respondent company after the redundancy of Mr Holmes and others in January 1994.

	They would submit that prior to the Applicant's redundancy and from June 1993 the respondent company had no work on its books, having completed its last contract in June 1993.

	Other submissions were made that contracts were obtained and certain employees were re-deployed. That these new contracts would be awarded to the respondent company was not anticipated.

		"In any event these matters had been dealt with by the time the respondent company ceased trading at the end of March 1994."

	All these and other matters required further consideration. They would necessitate consultation with the Liquidator. They therefore said that their letter should be treated as an application for an adjournment. They concluded:

		"In the event that the matter is not adjourned, we are not instructed to attend on behalf of our clients."

	The Industrial Tribunal responded promptly to that letter on 9th September 1994. Two letters were sent to Newbys. The first letter said that the Chairman of the Industrial Tribunals had refused the request for a postponement of the hearing of 12th September 1994. It was indicated that the Respondent company had the opportunity to submit dates but had neglected to do so. The fact that the writer of the letter from the firm of solicitors would be on holiday was not a good reason for a postponement. He would have to arrange alternative representations.

	The other letter said:

		"I am directed by a Chairman to say that they [that is the Respondents, Topside Group] must appear and make representations on 12 September 1994."

This correspondence was copied to the applicant's representative, as well as to ACAS.

	The Remedies Hearing duly took place on 12th September 1994. Mr Struther attended as before for Mr Holmes. Nobody attended on behalf of Topside Group or Topside Aluminium Systems Ltd. These facts were noted by the Chairman in the extended reasons notified to the parties on 3rd October 1994. It was also noted in paragraph 2 that evidence was given by an employee of Topside Group, Mr Hartford. He attended under a witness summons. Mr Struthers also indicated to the Tribunal that he had spoken to Mr Hutchinson at Topside Groups' premises and had been told that Topside Groups' solicitors had indicated that it was not necessary for Mr Hutchinson to attend at the Tribunal hearing.

	The Tribunal heard evidence from Mr Holmes about the events following his dismissal. They also heard evidence from Mr Hartford. As far as Mr Holmes was concerned, the Tribunal heard evidence, which was not contested, with regard to contract works conducted by the Topside Aluminium Systems Ltd and the fact:

		"... that he was working on contracts at a school at Boldon Colliery and a garage in Redcar before Christmas 1993, and after Christmas he was working on finishing a job for a company in Bristol. It was intended that the jobs in Sheffield and Darlington would commence. Within 2 weeks of being dismissed he discovered that the company had taken on and re-employed men to finish the Bristol job and the Sheffied contracts. After the Industrial Tribunal hearing on 11th July 1994 the applicant had spoken to some work colleagues and heard that other people had been taken back and he had then seen Topside vans in Middlesborough, including the very van which he had himself driven. He made enquiries with Topside to discover that several of the men with whom he had worked were again working including [Mr] Hartford, [Messrs] Myers, [Mr] Hunter and [Mr] Harper. ..."

It referred to the organisation of the companies and the fact that Topside Group was the holding company and the same directors had been on the boards of each company.

	They then referred to Mr Hartford's evidence that:

		"... he had worked as an aluminium fabricator. He was to be made redundant, but did not in fact get a redundancy payment. After three days from being paid off Mr Hutchinson had contacted him. Mr Hartford was already aware that he was to be taken on again under the name of Topside Group. Several of the employees had transferred directly to Topside Group and did not have to make any claims at all. The reason that Mr Hartford had been paid off was that had he had been on the module payroll at the time. The Topside Cunliffe people had been automatically transferred across to Topside Group. He confirmed that the same people who were still working with him at Topside Group Limited doing the same work as before on the same contracts."

	The Tribunal also saw the letter from Newbys, the solicitors for Topside Group, dated 7th September 1994. 

	On the basis of those matters Mr Struthers argued successfully that there was a transfer of an undertaking. The Tribunal therefore granted his application that Topside Group should be named as a Respondent.

	The Tribunal considered the provisions of Section 69 of the 1978 Act and the provisions in the Transfer of Undertakings Regulations 1981 in Regulation 5(2) and Regulation 8(1). The Tribunal's conclusion is that it was clear that the undertaking of Topside Aluminium Systems had been transferred to Topside Group in circumstances contemplated by the regulations.

	Finally, the Tribunal considered the provisions of Section 69(5) relating the re-instatement. They dealt separately with each of the items which the statute requires they should deal with. First, that Mr Holmes wished to be re-instated. Secondly, that it was practicable for Topside Group to comply with the order of re-instatement. Thirdly, that there was no question of Mr Holmes having caused or contributed to his dismissal which would make it unjust for there to be an order for re-instatement.

	The Tribunal accordingly made an order that he be re-instated to his position as a foreman in aluminium fabrication and that the Topside Group should pay him arrears of pay between the date of his dismissal on 21st January 1994 until the date of his re-instatement, and that he would return to Topside Group contemporaneously the redundancy payment paid to him on the termination of his employment. He was to have the rights and privileges, including seniority and pension rights, restored to him and the order for re-instatement must be complied by 31st October 1994.

       Topside Group Limited appealed against that decision by a Notice of Appeal served on 7th November 1994. They said it was an error of law for the Tribunal to have joined them as Respondents to an application whose merits had already been adjudicated upon before they were even joined. There was an error in law in deciding to add the Company without giving the Topside Group a reasonable opportunity to contest Mr Holmes claim. It was an error of law to find that there was a transfer of undertaking from Topside Aluminium Systems Ltd to Topside Group. It was an error of law to find that the principal reason for Mr Holmes's dismissal was a transfer of an undertaking. Such findings as there were, were unsupported by any evidence. It was an error of law to refuse the adjournment requested of the hearing fixed for 12th September 1994. They set out the particular matters which they relied on for saying that is was erroneous to refuse the adjournment.

	This matter first came on appeal to this Tribunal on 5th April 1995. It was adjourned for further evidence to be put to the Tribunal on matters listed in the judgment given on that day.

	We made it clear that we were not in the position to decide whether to allow the appeal or dismiss it. We wanted more information about a number of matters relating to the knowledge of the directors about the proceedings brought by Mr Holmes against Topside Aluminium Systems; about communications between the Liquidator of Aluminium Systems and the directors of the Topside Group; about the statement of affairs of Aluminium Systems Ltd; and we wanted an explanation as to the circumstances in which no action was taken to contest the proceedings on behalf of Topside Aluminium. We also wanted details about who were the directors of the various companies at the relevant times.

	We directed that the matter would be resumed for a Full Hearing sometime this month.

	Today is the resumed hearing. We have heard the detailed arguments on each side. We have read the affidavits which have been produced on behalf of Topside Group and also a late affidavit put in on behalf of Mr Holmes. 

	We are now in a position to make a final decision about this case.

	We can give our reasons briefly for dismissing this appeal.

	Mr O'Neill said that there were two errors of law in the decision. The first error of law was the refusal of the Tribunal to adjourn the hearing of 12th September 1994 without giving Topside Group a reasonable opportunity of contesting the issue of unfair dismissal. He said that his clients were not parties to the proceedings at the time when it was decided that Mr Holmes was unfairly dismissed. They had no knowledge of the proceedings at that time. It was contrary to the decision by the Employment Appeal Tribunal in Watts v Seven Kings Motor Co Ltd [1983] ICR 135 to join a respondent to proceedings without giving that respondent an opportunity of an application to be heard in the matter. He says that this error requires us to allow the appeal and to remit the matter to an Industrial Tribunal, so that his clients can then bring forward evidence and argument as to why they should not be liable for Mr Holmes's dismissal.

	We reject that argument. In our view, there was no error of law. The Tribunal has under its rules a discretion as to whether to postpone or adjourn hearings. We would only interfere with that discretion if it was exercised contrary to legal principle or on perverse grounds, such as by looking at irrelevant matters, or leaving out of account relevant matters. By reason of the facts already stated the position was that Topside Groups' solicitors, Newbys, knew of the date of the hearing. They had applied for an adjournment which was refused. They were told they should attend. A decision was deliberately taken that Newbys would not be instructed to attend. A decision must have been deliberately taken by Topside Group that no one from that company would attend. They should have attended if they wish to contest the case or be disjoined. If they had attended they could have repeated the application for an adjournment deploying in more detail the difficulties of fighting the case on remedies without further time to prepare the case. If a party is notified of a date for hearing and is notified of a refusal to postpone the date and fails to turn up, a Tribunal is entitled to proceed with the hearing of the case and decide it on the basis of such evidence and argument as being put before it. It is not error of law for a Tribunal to proceed to decide a case on hearing one side only, when the other side has been notified and has deliberately decided not to attend. There was no perversity or other error in the decision to proceed to a decision. Topside Group took the risk that the decision would be against them. They cannot come along later and say it was an error to decide it in their absence. 

	The second ground is that the decision contains an error of law in holding that there was a transfer of an undertaking from Topside Aluminium Systems to the Topside Group. Mr O'Neill referred us to the regulations, in particular Regulation 5. These deal with the effect of a relevant transfer on contracts of employment. He referred us to the provisions of 5(1) and (2) and to 5(3) which states:

		"Any reference in paragraph (1) or (2) above to a person employed in an undertaking or part of one transferred by a relevant transfer is a reference to a person so employed immediately before the transfer, including, where the transfer is effected by a series of two or more transactions, a person so employed immediately before any of those transactions."

	His argument on this was simple. Mr Holmes did not come within that provision. He had ceased to be an employee of Aluminium Systems Ltd on 21st January 1994. Aluminium Systems Ltd was not put into liquidation until 31st March 1994. On the affidavit evidence put in in response to our directions, it was said that the first involvement in transfer of contracts from Aluminium Systems Ltd to Topside Group was in the week or so before the company was put into liquidation, that is from about 23rd March 1994 onwards. In those circumstances it could not be said that Mr Holmes was employed immediately before the transfer.

	In our view, there was no error of law by the Industrial Tribunal in the decision that there was a transfer of an undertaking. The Tribunal heard evidence from Mr Hartford as well as Mr Holmes. That evidence was not disputed. Whether there is a transfer of an undertaking or not is primarily a question of fact. The Tribunal referred to the relevant provisions in Regulation 5 and to the case of Litster. We can find nothing in the reasoning of the Tribunal which reveals an error of law in the interpretation of the regulations or in applying the regulations to the facts found by them on the evidence given by Mr Holmes and Mr Hartford. In our view, the Tribunal were entitled in those circumstances to find that Topside Group became the transferee of the undertaking in which Mr Holmes had previously been employed, became his employer and were properly joined as respondents to the Remedies Hearing on 12th September 1994. On order could therefore be made against them for re-instatement under Section 69(5).

	We would add this. Even if, on the facts that have been found, there was no transfer of an undertaking, the Tribunal would have been entitled on the facts found to make an order for re-engagement pursuant to Section 69(4) of the 1978 Act. They could have made such an order against Topside Group as an "associated employer" within those provisions, even though there was no transfer of an undertaking making them employers of Mr Holmes.

	For all those reasons we have decided that this appeal should be dismissed. There is no error of law in it.

	Request for costs refused.

	Leave to appeal refused.