Appeal No. EAT/561/93

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 6 June 1995

	Before

	THE HONOURABLE MR JUSTICE MUMMERY (P)

	MRS J M MATTHIAS

	MR S M SPRINGER MBE

PGR MANAGEMENT LTD	APPELLANTS

J DAVIS AND OTHERS	RESPONDENTS

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellants	MR PETER REDMAN
	(Solicitor)
	Messrs Palmers
	19 Town Square
	Basildon
	Essex
	SS14  1BD

For the Respondents	MR LESLIE SAMUELS
	(Of Counsel)
	The Tattersall Partnership
	10A Broadway North
	High Road
	Pitsea
	Essex
	SS13  3AY

	MR JUSTICE MUMMERY (PRESIDENT):   This is an appeal against the decision of the Industrial Tribunal held at London (North) on 30 March 1993.  The Tribunal unanimously decided that there was a transfer of a business as a "going concern" within Regulation 3(2) of the Transfer of Undertakings (Protection of Employment) Regulations 1981.  They held in the Full Reasons notified to the parties on 30 April 1993, that the undertaking of a company called Essex and Kent Waste Disposal Ltd (E & K) had been transferred to the Respondents, PGR Management Ltd.  The Applicants, Mr Davis, Mr Miklewicz and Mr Smith had been employed by E & K.  The Tribunal concluded in the final paragraph of the decision that there was a transfer of an undertaking and that the three Applicants had sufficient continuity of employment to enable them to bring claims to the Tribunal for unfair dismissal.   PGR Management appealed by a Notice of Appeal served on 10 June 1993.  
	The matter first came before the Employment Appeal Tribunal as a Preliminary Hearing on 24 March 1994.  The Tribunal directed that the appeal should proceed to a full hearing.  Directions were given for the production of Skeleton Arguments.  We are grateful to the parties for complying with that direction.  At the hearing today, PGR Management Ltd have been represented, as they were at the Industrial Tribunal, by Mr Redman.  Mr Samuels has appeared for Mr Davis, the Respondent.  The two other Respondents have not taken an active part in resisting the appeal.  (Of course, it does not follow that the appeal should be allowed, simply because they do not attend to resist it.)  The burden is on the Appellant company to establish that there is an error of law in the decision of the Industrial Tribunal.

	The facts found by the Tribunal were these: E & K operated a business from a site in Tilbury, collecting waste from various clients and disposing of it.  On the site leased by two of the Directors to E & K, there was a transfer of waste unit that was not fully operational, because it had not been approved by the Council.  The company, E & K, had two Directors, a Company Secretary, a Book-keeper and nine other employees.  The Applicants were all employees.  PGR Management operated from a site in Basildon.  They were also involved in the business of collecting waste from various clients.  E & K had business difficulties at the end of 1992.  Mr Toomey who gave evidence to the Tribunal, confirmed that he heard of these difficulties.  He suggested that his company, PGR Management, might wish to purchase skips and lorries belonging to E & K, as it was going into liquidation.  An agreement was reached that PGR Management should pay a substantial sum to E & K and take over outstanding hire purchase liabilities on lorries and some equipment.  PGR Management agreed to rent the site at Tilbury from the Directors on a monthly basis.  None of these transactions were reduced to writing.  On 30 November 1991 the Directors of E 
& K called their employees to a meeting.  Mr Toomey, a Director of PGR Management, attended the meeting.  The employees were informed that E & K was in financial difficulty and that they were ceasing trading.  Each of the employees was handed a P45 and the balance of wages due; and informed that Mr Toomey was available to discuss employment with them.

	The three Applicants immediately discussed employment with Mr Toomey.  They were given contracts of employment with PGR Management, on slightly different terms than their previous employment.  There were no written terms and conditions of employment with E 
& K and they were not given any written terms by PGR Management.  In February 1992, E & K went into liquidation.  The company had sold all its assets, except a lorry and a van.  It was Mr Toomey's understanding that the Directors of E & K were going to try and run a road cleaning business from their homes.  On 2 December, PGR Management moved on to the site and the Applicants employment commenced with PGR Management on that day.  As far as clients of E & K were concerned, Mr Toomey spent the next three months visiting them.  He tried to persuade them to keep on using PGR Management for their waste disposal.  Some of the clients were lost, but others remained.  PGR Management tried to put in operation the transfer waste unit on the Tilbury site, but could not get the Council's approval.  They decided they would move all their operations back to Basildon and relinquish the Tilbury site.  In July and August 1992, Mr Davis and Mr Miklewicz were dismissed on the grounds of redundancy.   Mr Smith was dismissed in September 1992 for misconduct.

	The question for the Tribunal was whether in these circumstances there was a transfer of an undertaking within the meaning of the regulations.  It was submitted by PGR Management that there was no transfer, that there was only a purchase of assets.  The Tribunal made findings of fact in paragraph 8.  They stated three important matters, first that both of the companies, E & K and PGR Management, carried on the same business.  PGR Management endeavoured to keep the existing clients of E & K as their clients.  Secondly, PGR Management operated from the same site as E & K at Tilbury.  If they had managed to obtain permission for the transfer waste operation, they would have remained on the site.  Thirdly, the three Applicants had been employed by E & K.  They were immediately offered employment by PGR Management at the same meeting as they were informed that E & K were ceasing to trade.  Redundancy was not discussed with E & K and the Applicants.  PGR Management took on most of the existing employees of E & K.  The only employees not re-employed by PGR Management were the two Directors, a Company Secretary (who happened to be a Director's wife), a son of a Director and a Book-keeper.

	The Tribunal said:

	"In the end, the vital question is whether the effect of the transaction was to put the transferee in possession of a going concern, the activities of which he could carry on without interruption. Many factors will be relevant, though few will be conclusive in themselves.  Thus, if the new employer carries on business in the same manner as before, this will point to an existence of a transfer."

They were referred to decisions of the European Court.  In particular the Daddy's Dance Hall A/S IRLR 315 case, which stated that the acquired rights directive and therefore the regulations should apply where there is simply a change in the nature of the legal person responsible for operating the undertaking who consequently enters into the obligations of an employer towards the employees working in the undertaking.

	What is wrong in law with that decision?  Mr Redman submitted that the Tribunal had erred in law.  He emphasised the following factors; that his clients had only purchased some skips and lorries from E & K.  There was no purchase of goodwill, no transfer of contracts or other assets.  As far as the site was concerned, his clients had only taken a monthly lease and that was from two of the Directors of the company.  After the alleged transfer E & K continued in existence; it went into liquidation about three months later.  PGR Management continued its own business as before, with only one minor change, insofar as they used the site that belonged to the Directors of E & K to service clients in West Essex and continued to use their existing Basildon location to service clients in the East part of the county.  He referred to authorities, which were not in dispute, to the effect that a mere sale of assets is not a transfer of an undertaking within the meaning of the regulations.  He emphasised that the test was whether there was an identifiable economic unit still in existence after the alleged transfer.  He relied there on the same case as was relied on by Mr Samuels for the Respondents, Spijkers v Gebroeders Benedick Abatoir [1986].  His submission was that the Tribunal mis-directed itself in paragraph 9 of the Decision in its reference to the Daddy's Dance Hall A/S case and submitted that, on any view of the facts, this was not a case of a simple change in the nature of the legal person operating the undertaking.  PGR Management operated its own business.  At no time did it operate a business that was identifiable as E & K's business.  E & K's business continued in a reduced form after the sale of the lorries and skips.  After the sale of assets, the E & K business did not retain any identity within the business of PGR Management.  There was, therefore, no business transferred as a going concern and, on the proper interpretation of the Regulations, they did not apply to this case.

	Those points have been emphasised in oral submissions by Mr Redman.  He reiterated that there was only a transfer of assets and a transfer of assets is not a transfer of an undertaking.  He accepted that there were employees doing the same type of job for a different employer, but that was not sufficient to satisfy the test.  There was no transfer of an undertaking.  Rather the undertaking of E & K had ceased to exist.  There was no identifiable economic entity retaining its existence in the hands of PGR Management.  We are unable to accept these submissions.   The question whether or not there is a transfer, within the meaning of the regulations, is essentially a question of fact.  The conclusion that there has been a transfer can only be faulted on appeal if the Tribunal had adopted an incorrect legal approach in determining whether there was a transfer, for example, in its construction of the Regulations or in their application to the facts, or if it could be shown that their conclusion that there was a transfer was a conclusion that no reasonable tribunal, with a correct appreciation of the law and understanding of the facts, could have reached.

	In our view, there is no error of law in this decision.  Mr Samuels, in support of the decision, referred to the relevant regulations (Regulation 3(1) and Regulation 5(1)) and reminded us of the correct test laid down in the case of Spijkers [1986] 3 ECR 1119.  He referred us to two passages, one in the judgment of the Court at paragraph 13 page 1128, where the Court said:

	"...In order to determine whether those conditions are met it is necessary to consider all the facts characterising the transaction in question, including the type of undertaking or business, whether or not the business's tangible assets such as buildings or moveable property are transferred, the value of its intangible assets at the time of the transfer, whether or not the majority of its employees were taken over by the new employer, whether or not the customers are transferred and the degree of similarity between the activities carried out before and after the transfer, and the period, if any, for which the activities were suspended.  It should be noted, however, that all those circumstances are merely single factors in the overall assessment that must be made and cannot therefore be considered in isolation."

	It is clear from the later paragraph and from later decisions, that the overall assessment is by reference to the question: whether the business in question has retained its identity in different hands.  We refer to paragraph 15, of Spijkers.  We have also referred to a paragraph in the Opinion of the Advocate General at page 1121 where he said:

	"At the time of the transfer the business is still active.  The machinery is being used, customers supplied, workers employed and that all the physical assets and goodwill are sold, are strong indications that a transfer within the meaning of the Article has taken place but these are not all necessary prerequisites of a transfer in every case.  A realistic and robust view must be taken and all the facts be considered."

	Following Spijkers, there are other cases to which reference was made by Mr Samuels: Isles of Scilly v Brintel Helicopters Ltd [1995] ICR 249 page 254; Kelman v Care Contract Services Ltd [1995] ICR 260 page 267/268.  Applying the tests laid down in those cases, we are of the view that the Tribunal came to a conclusion which is legally unassailable.  They supported their conclusion by referring to relevant facts, principally the facts that both E & K and PGR Management carried on the same business.  PGR Management endeavoured to keep existing clients of E & K as their clients.  The operations were conducted after the alleged transfer from the same site.  The individual employees were offered employment by PGR Management at the same meeting as they were informed that E & K was ceasing to trade.  The majority of E & K's employees were taken on.  Having regard to all those facts, which, in our view, are relevant to the question whether there is a transfer or not, the Tribunal came to a conclusion that there was a transfer.  There is no legal error.  In our view, this appeal should be dismissed, for the reason that the Tribunal came to a conclusion by applying the correct legal test to the facts that they found.  It was a transfer of an undertaking.  

COSTS OF JUDGMENT
EAT/561/93  PGR MANAGEMENT LTD v J DAVIS AND OTHERS
Mr Samuels has made an application for the costs of the appeal under Rule 34, which provides that: where it appears to the Appeal Tribunal that any proceedings were unnecessary improper or vexatious, or that there has been unreasonable delay or other unreasonable conduct in bringing or conducting the proceedings, the Tribunal may order the party at fault to pay any other party the whole or such part as it thinks fit of the costs or expenses incurred by that other party in connection with the proceedings.

Mr Samuels' submission is that it was unreasonable for PGR Management to persist in this appeal after the decisions handed down by the European Court of Justice in Schmidt v Spar and by the Court of Appeal in Dines following the Preliminary Hearing which took place in this case last March.  He criticises the Notice of Appeal and the Skeleton Argument of PGR Management, as failing to disclose a point of law to be raised on the appeal in any event.  He therefore says that there has been unreasonable conduct in relation to this appeal and his clients should have an order for costs.  

We are unable to accept that argument.  At the Preliminary Hearing last March, the Tribunal ordered that the appeal be allowed to proceed to a full hearing of the Employment Appeal Tribunal.  In our view, PGR Management were entitled to rely on that order to justify taking the matter to a full hearing.  It is, we think, not unreasonable conduct to act on a decision that the Tribunal has given and a direction made at the Preliminary Hearing.  In those circumstances, the only order we make on costs is that there be a Legal Aid taxation of the Respondents' costs.