Oakland v Wellswood (Yorkshire) Ltd

This is an appeal, following permission given by Mummery LJ, which I had thought was going to concern the question of the application of the Transfer of Undertakings (Protection of Employment) Regulations 2006, to an administration which was described as a “pre-packed administration” in circumstances that I will identify shortly. As it turns out, the issue has become whether, in the context of section 218 of the Employment Rights Act, the appellant has continuity of employment.

The circumstances which give rise to this second tier appeal are these: Mr Oakland, the appellant, was the general manager of a company of Wellswood Limited, described for the purposes of the issues in this as “Oldco”. He was the general manager between the period of 2003 and December 2006. As a result of financial difficulties, Wellswood Limited consulted insolvency practioners and went into administration on 6 December 2006. Prior to going into administration, there had been discussions about Wellswood Limited’s financial problems with a customer, Gilbert Thompson Leeds Limited.

As a result of those discussions, Gilbert Thompson Leeds Limited caused a new company to be incorporated as its wholly owned subsidiary. That was described during the litigation as “Newco”. This was to be a vehicle for acquiring the assets of Oldco, Wellswood Limited, including the industrial unit from which it traded and all the apparatus and material necessary for a wholesaler of fruit and vegetables. One of the vital features was that the new company should take over a tenancy of the premises so that other customers would know where to go to buy the fruit and vegetables. On 6December 2007 Oldco went into administration and Newco brought commercial freezers and fridge units into the premises previously occupied by Oldco.

Some of the employees, five out of the seven including Mr Oakland (although I should observe that this was an issue in the litigation), became employees of Newco. But just shortly before the expiry of one year of what he said was his employment with Newco (Wellswood (Yorkshire Limited), now in administration), they dismissed Mr Oakland, he said, without notice. He therefore brought proceedings before the Employment Tribunal. At the Employment Tribunal he had the benefit of representation by Ms Toman, who appears before us today.

Preliminary issues were ordered to be heard, and Ms Toman had expected those preliminary issues to be concerned with the question as to whether Oldco’s undertaking had been transferred to Newco; and, further, whether Mr Oakland was an employee. But to her surprise, when she appeared before the Employment Tribunal on that preliminary hearing, she was furnished with a skeleton argument, and told that there was to be no issue as to whether Oldco had transferred its undertaking to Newco on 6 December 2006. That concession is recorded in the decision of the Employment Tribunal before Regional Employment Judge Sneath, which was a reserved judgment. There still remained the question as to whether Mr Oakland was an employee; and further, a new question which Ms Toman had not anticipated. That new question was the issue which I had thought this court was going to consider at the hearing today.

The issue arose in this way. Mr Oakland had brought proceedings pursuant to the Employment Rights Act 1996 contending that he had been unfairly dismissed in breach of his right enshrined in Section 94 of the Employment Rights Act 1996. In order to vindicate that right, he had to establish that he had been continuously employed for a period of not less than one year ending with the effective date of termination (see section 108(1) of the Employment’s Right Act 1996). The point taken by Wellswood (Yorkshire) Limited, Newco, for the first time before the Employment Tribunal was that, by virtue of Regulation 8(7) of the Transfer of Undertakings (Protection of Employment) Regulations 2006, the contract of employment had not been transferred to the new company because the transferor, Oldco, was the subject of bankruptcy proceedings or an analogous insolvency proceedings which had been instituted with a view to liquidation of the assets of Oldco.

The Employment Tribunal gave Ms Toman an opportunity to consider the point over what must have been a somewhat disturbing luncheon adjournment, and then Ms Toman argued that the provisions of regulation 8(7), designed as they were to implement Directive 2001/23/EC (the Consolidated Acquired Rights Directive), had no application because the administration into which Oldco had entered was not bankruptcy nor analogous insolvency proceedings instituted with a view to the liquidation of the assets of Oldco.

The Employment Tribunal disagreed, and it did so on a basis which I had anticipated (or expected at least) was going to be the subject of the controversy and the debate today. The Employment Tribunal concluded that, as a matter of fact, once the administrator had examined the affairs of Oldco it had emerged that liquidation was going to be the most effective realisation for the benefit of Oldco’s creditors. It thus concluded that, as a matter of fact, the administration fell within the provisions of regulation 8(7) of the 1996 TRUPE Regulations and thus there was no transfer of the contract of employment.

The matter was appealed to HHJ Peter Clark, sitting on his own in the Employment Appeal Tribunal. He also took the view that that was the right approach to the question of the application of regulation 8 and dismissed the appeal. The issue was then taken up not only on behalf of the appellant but also on the behalf of the Secretary of State For Business Innovation and Skills; anxious, as he was, to protect the fisc since, had regulation 8(7) applied, the Secretary of State would be under obligation to pay out certain sums from the National Insurance fund.

This court was thus furnished with full written submissions from the Secretary of State on the point and also a full skeleton on the point from Ms Toman. Supplied with that, it was not surprising perhaps that Mummery LJ gave leave, and for my part I would wish to emphasise that there are strong grounds for thinking that both the Employment Tribunal and the Employment Appeal Tribunal took the wrong approach to their construction both to the Article 5 of the Directive and to Regulation 8. But within the written argument advanced on behalf of Ms Toman was a point that certainly caught the eye of Mummery LJ. This was a point that finessed the whole question of the application of the TUPE Regulations by reference to a provision within the Employment Rights Act itself, namely Section 218. If that applied then Mr Oakland would be entitled to count the period of his employment with the old company in establishing continuity of employment of at least one year with the new company.

This was a point that had not occurred to Ms Toman or those instructing her previously but did occur to her by the time of the application to the Court of Appeal. I would spare her blushes and avoid emphasising the misfortune that it did not occur to her, at least by the time she went to the Employment Appeal Tribunal; but, if one looks back over the many years which others of us have shared her noble profession, it is unlikely that any of us could, I suspect, claim that the same disaster had not also occurred to each one of us.

In those circumstances it is necessary to look at that new point, firstly with a view to considering whether it is open to her at all to take it. It is well-established that it is not open to an appellant during the appeal process to take a point when it could have been taken earlier when it might lead to an injustice to the other side because it deprives the other side of raising either arguments or facts which might have been aired and resolved at the appropriate place, namely at the trial of the action.

However, it is plain that there will be rare circumstances where there can be no question of any injustice and where, as it turns out, the new point is a knockout blow in the appeal. If authority is needed for such an approach it can be found, for example, in the review of authorities by the Court of Appeal in Glennie v Independent Magazines (UK) Ltd [1999] IRLR 719 and in particular in the references to well-established authority at paragraphs 10 and 11, particularly those of Arnold J in Kumchyck v Derby City Council [1978] ICR 116 and in the judgment of Widgery LJ in Wilson v Liverpool Corp [1971] 1 WLR 302 at [307].

For my part, I am quite satisfied that the new point is a point of pure law requiring no factual enquiry. No injustice is imposed upon Newco since it has had notice of the point ever since the skeleton argument was served upon it and certainly since the time it was notified of the permission given by Mummery LJ which refers specifically to that point.

Let me then turn to reveal what the point is. Section 218 of the Employers Rights Act 1996 comes within the congeries of Sections which start with the opening of Part XIV, chapter 1, Continuous Employment. Section 210(1) provides that references to a period of continuous employment are to a period computed in accordance with chapter 1 of part 14. Section 2(1)(8), under the rubric “Change of Employer”, provides, relevantly for the purposes of this appeal, by subsection (1):

“Subject to the provisions of this section this chapter relates only to employment by the one employer.

(2)

If a trade or business, or an undertaking (whether or not established by or under an Act), is transferred from one person to another --

(a)

the period of employment of an employee in the trade or business or undertaking at the time of the transfer counts as a period of employment with the transferee, and

(b)

the transfer does not break the continuity of the period of employment.”

In the instant appeal the business or trade of Oldco, Wellswood Limited, was by concession transferred from the Oldco to Newco, Wellswood (Yorkshire) Limited, in administration. By virtue of Section 218(2) Mr Oakland’s period of employment -- something in the region of three years in the old company -- is to be added to the period just under a year, in which he was, he contends, in employment of the new company, and thus he had been in continuous employment for the purposes of Section 108 for a period of not less than one year. That confers jurisdiction on the Employment Tribunal to resolve the question of his unfair dismissal without any need for him to rely upon the provisions of regulation 8 of the Transfer of Undertakings Regulation (Protection of Employment) Regulations 1996 as interpreted in accordance with the Directive.

In those circumstances, adopting the wisdom of Rix LJ, it would seem to me most unwise for us to give a binding pronouncement on the correctness or otherwise of the contention that administration necessarily excludes the application of regulation 8(7). I would only, for my part, wish to emphasise that that is a strongly arguable point, and the only reason I agree that it should not be resolved today is that the Secretary of State is not here and, since the Wellswood (Yorkshire) Limited Administration, Newco, is in the process of being liquidated almost as we speak, and therefore has no representation here today, it would be unwise to reach and pronounce upon any definitive conclusion. Expressing regret that that cannot be done today, I would allow this appeal.

I agree.

I also agree.