Leo Group International Ltd v Peter Rusworth & Ors

This is an application for permission to appeal against a determination of the Employment Appeal Tribunal on 16 August 2007. They were considering an appeal that had been set down for a preliminary hearing under paragraph 9 of the practice direction by the order of the President Elias J.

It will set the context of this appeal if I refer to what the President said. He said this, in ordering a preliminary hearing:

“It seems to me that all the grounds identified with the decision which go to the question of whether there was a transfer and what the circumstances were are doomed to fail because in substance they rely upon matters of fact which are not before the Tribunal.”

And he said a good deal more which I may come back to.

The background of the matter is this. The applicants in the tribunal, respondents to this appeal, are a number of former senior employees -- indeed, directors -- of a company called YCL. That was a business in Leeds occupied, as I understand it, mainly in the sale and distribution of dyes for textiles. It had encountered some difficulties in its business, and on 13 December 2005 went into administration. The well-known accountancy firm, KPMG, or more accurately, two partners therein, were appointed as the administrators. The appellant here is a company which is located in Hong Kong. On or about 13 December, as the Employment Tribunal found as a fact, the managing director of that company (and, as I understand it, the gentleman who in fact owned it) flew to the United Kingdom and entered into discussions with KPMG about the purchase of the business. There were other prospective purchasers also. It seems that on 20 December 2005 the respondents made an offer to KPMG to purchase the business of YCL. The matter was not concluded on that date. Shortly thereafter, certain of the employees of YCL were told that they would be made redundant. That did not, at that time, include the respondents with whom we are concerned.

Discussions continued between KPMG and the respondents and on the morning of 13 January 2006 one of the respondents was informed by Mr Nicholson, the gentleman already referred to from the respondents, that a deal had been concluded and that a meeting needed to be called with the remainder of the staff. At that meeting they were told that the European business of YCL had been sold to a Hong Kong company, and the deal would be finalised in the course of the next few days. They were also told that, there and then, KPMG would make all the staff redundant, and that then short-term contracts might be entered into with some of them.

The Employment Tribunal, in paragraph 4(11) of its determination, recorded and apparently accepted as truth that Mr Rushworth told them that he had, at that meeting, told Mr Nicholson and Mr Low (the owner of the company) about the requirements of United Kingdom law with regard to transfer of undertakings, and that he formed the view -- which the circumstances of this case would suggest was well-founded -- that they had little understanding of the obligations that they had to meet under those provisions. In accordance with the scheme, Mr Rushworth and other employees were, at 10.30 that morning, told that they were being made redundant and were there and then dismissed.

The contract for the sale of the business was finally concluded on 16 January, some two or three days after the events to which I have just referred. The Employment Tribunal found as a fact that the respondent’s business continued to operate in an identical manner save that the Head Office was moved to Germany. The only other fact is that on 26 (as I think it was) of January, KPMG produced a document which is described as the KPMG report, but is in fact the report of the administrators to the shareholders. That document plays a part in the matters debated in this appeal.

Because they considered, as the Employment Tribunal found correctly, that they had been unfairly dismissed, the employees brought proceedings in the Employment Tribunal. Those had an extremely unsatisfactory course. Putting it shortly, the employers were completely derelict in their obligation to give disclosure of documents. In fact, Mr Burgher, who has represented them this afternoon, in the course of seeking to say that the employees had deceived the tribunal because they had not put before it one document that as directors they had in their possession, was constrained to agree that his client, as the company, would have had this document, but that it could be excused from any suggestion of misleading the court by not producing this document by the very fact that it produced no documents at all.

When the matter came for trial before the tribunal on 2 October 2006, there had previously been applications for postponement or mercy on the part of the employers in an attempt to comply, very belatedly, with their obligations under the rules. On that day the employers were represented by solicitors and counsel -- not Mr Burgher nor, I note, the person who had settled the grounds of response -- and counsel told the tribunal that he had instructions to renew the application for postponement. The tribunal said this in paragraph 2.13 of its determination:

“[Counsel] conceded that the Respondents were still in total default of all Case Management Orders made by this Tribunal relating to discovery or to the service of witness statements. He submitted the Respondents had a meritorious defence, which should be heard. He conceded that the Claimants had been fully compliant with all Tribunal Orders, but that the appropriate course of action was to postpone the Hearing and to penalise the Respondents, yet again, in costs. He conceded unreasonable behaviour on the part of the Respondents. He submitted that if the Hearing proceeds, he will be in a position only to challenge the Claimant’s case, without the ability to positively assert a case on the part of the Respondents. He said he believed the Respondents had now awakened to the need to deal with these proceedings and he was optimistic that if the Hearing was postponed, with further Case Management Orders made, those Orders would be complied with.”

The tribunal refused that application. There is no appeal against that refusal. The Tribunal, having indicated that the matter would not be adjourned, in paragraph 2.17 of their determination report what counsel said he had been told to do:

“[Counsel] indicated that he was instructed to continue to represent the Respondents at this hearing, on the basis he would cross-examine in order to challenge the Claimant’s case, if he thought it appropriate, and would make such final submissions as he thought appropriate.”

We are told by Mr Burgher that, as far as he knows, counsel did not in fact cross-examine anybody. The hearing therefore proceeded on that basis, apparently with counsel for the employers acting more or less as a spectator. The tribunal took evidence from three of the applicants: Mr Meredith, former managing director; Mr Rushworth, former human resources director; and a Mr Baxter, a technical sales manager. They reached various conclusions which can be summarised as follows, some of which I have already mentioned. This was a case that fell under the transfer of undertakings regulations. The transfer had taken place either on 20 December or possibly on 13 January 2006. It was clear to the tribunal, and I would add that it cries out from the fact that the reason why the claimants were dismissed, as indeed KPMG told them, was related to the transfer. Applying the purposive construction of the Regulations that is required by the decision of the House of Lords in Litster v Forth Dry Dock Engineering Co Ltd [1989] IRLR 710 CA, they concluded that the employees were deemed to have been employed by the respondent, not by KPMG, immediately before the transfer. That, in my view, was an inevitable finding, whether it is said that the transfer took place on 13 or 16 January. The whole point of the Litster jurisprudence, which is based upon a directive of the European Union, is to stop things like this happening -- that is to say, that the vendor reaches a concluded agreement in all but signed form with the purchaser, and then dismisses the employees so that the purchaser may avoid any responsibility for redundancy on their part.

The tribunal then considered whether it could be demonstrated by the respondents that the dismissals were fair, because they were for an appropriate economic, technical organisational reason, and they behaved reasonably in making the dismissals. Since they have given no evidence and, as far as we can see, did not make any submissions either it was quite impossible for the respondents to discharge that burden. So it was found -- and I have to come to this implication to this at the end of the judgment -- in December 2006, eighteen months ago, that these gentleman had all been unfairly dismissed.

The appeal sought to raise a wide range of criticisms of the determination of the Employment Tribunal. It is said that they got the date of transfer wrong (it should have been the 16^th); they misapplied Litster; and they wrongly considered that there were no economic, technical organisational reasons. None of those complaints were open to the appellant’s on the basis of the way in which the case had been conducted in the Employment Tribunal, but is said that that all goes out of the window because the Employment Tribunal misconducted the hearing. The way in which it is said to have misconducted the hearing is that it did not address its mind to the KPMG report. Now, as I have already said, the employer produced no documents and gave no evidence, so it was not he who put the KPMG report in the hands of the tribunal. It was before the tribunal because it had been brought there by the employees and was amongst the tribunal documents. Mr Burgher says that in those circumstances it was the obligation of the Employment Tribunal first of all to identify and find the KPMG report amongst the papers (which it was never asked to do it by the employer) and then to test the evidence of the witnesses against what was said in that document: a task expressly eschewed by counsel for the employer at the hearing. Had they done that, says Mr Burgher, it would have become apparent to them that the evidence was unreliable, that the facts were different from those that they found, and either we should discharge their order and substitute a contrary order, or at least should send it back for reconsideration.

I am afraid those submissions are completely hopeless. They seem to assume that when a party has conducted a first instance, hearing not by accident or oversight but by deliberate decision, in a particular way, the Employment Tribunal is under some obligation to try to save him from the consequences of his own decisions. That simply cannot be right. Of course it is true that in an Employment Tribunal matters are dealt with sometimes more informally than they would be in the High Court and therefore, for instance, when a working man, unrepresented, appears in front of the tribunal, it may well exercise itself to try to help him to put his case in a way that will assist him and the Tribunal itself. That is a perfectly proper and understandable role for a tribunal; it is not perfectly understandable for a tribunal to take up a case that has not been put by a represented employer, and seek to undermine the case as put by the other side. Quite apart from that being an inappropriate role, if it were thought to be the role of the Employment Tribunal this case itself shows that such a procedure would open up impossible difficulties.

We have read the KPMG report. We have not had the benefit of being addressed on it because it is irrelevant to our task, but we may claim some understanding of these matters and, speaking for myself, I had some difficulty in seeing how, armed with that report, the cross-examining tribunal would have set about destroying the employees’ case. At the very best it would involve the tribunal making assumptions on behalf of one party, and seeking to place its own understanding on the KPMG report: which I emphasise was not written as a report on this case, it is a report of the administrators. The whole task would have bordered on the impossible. I fear that in this case the employers are, and are rightly, bound by the decisions that they took two years ago. This is a case which should not have been appealed to the Employment Appeal Tribunal and certainly should not have been appealed to this court.

The aspect of it that I am also extremely concerned about -- and we will wish to hear what the present position is – that, this decision was made in December 2006. As I understand it, a remedies hearing has still not taken place, eighteen months later; and it is of the first importance, if that is so, that the remedies that the tribunal held these employees should now be entitled to be actively pursued.

For those reasons I would refuse this application.

I agree.