ICAP Management Services Ltd v Berry & Anor

Mr Dean Berry, the first defendant in these proceedings, was employed by ICAP Management Services Ltd, the claimant, as Chief Executive Officer of a division of the group of the Claimant group of companies called “Global e-Commerce”, pursuant to a contract of employment dated 10 May 2013. ICAP Management Services Ltd (or “IMSL”) was a service company providing services to companies in the ICAP Global Broking Business (or “IGBB”).

By the terms of the contract, the employment of Mr Berry could be terminated by either party on twelve months’ prior written notice. The contract also entitled IMSL to place Mr Berry on what is called “garden leave”, during which period he would not be required to perform any of his duties but would continue to be paid his salary (although not a bonus). The contract included post-termination restraints on competition, dealing with clients and poaching other staff.

On 22 July 2016, Mr Berry gave written notice to the claimant terminating his employment on 21 July 2017. Three days later, BGC Services (Holdings) Limited (“BGC”) a global brokerage company and a competitor of IGBB and the claimant, issued a public announcement indicating that the first defendant would be joining the company as an executive managing director in its global electronic and hybrid execution team, subject to his outstanding legal obligations.

As at 30 December 2016, the shares of IMSL were owned by ICAP Holdings Limited, the shares of that company were owned by ICAP Global Broking Holdings Limited (“IGBHL”) and the shares of that company were owned by ICAP plc. On that date ICAP plc sold the shares in IGBHL to a company called Tullett Prebon plc. On the completion of that sale Tullett Prebon plc was renamed, TP ICAP plc.

On 3 March 2017 Mrs Justice O’Farrell made an order that the first defendant should not, directly or indirectly, be employed by, provide services to, work for, or in any way assist BGC, should not have any contact with clients or employees of the ICAP group, and should not make use of any confidential information belonging to the ICAP group. She also ordered that until 5 May 2017 the second defendant should not induce or procure the first defendant to work for BGC.

It now falls to me to consider the merits of the claimant’s case against the defendants and to decide whether the injunctions granted by O’Farrell J should be continued. Essentially, it is the case of the claimant that the injunction should continue until 21 July 2017. It is the case of both defendants that the interim injunction should be set aside.

This case came on for hearing on 28 April 2017. At the parties’ suggestion, but with my agreement, a live transcription service was employed throughout the hearing. I was provided with a typed transcript of evidence and argument at the end of each day. That was very helpful.

In advance of the hearing, I had received skeleton arguments from all three parties. Paragraph 12.3.8 of the Queen’s Bench Guide sets out the requirements for a skeleton argument. It provides that skeleton arguments should “not normally be longer than twenty pages of doubled spaced A4 paper”. Converting the skeleton arguments in this case to that format produces a skeleton argument from the claimant of 151 pages, plus 35 pages of appendices. For the first defendant the figure was 158 pages, plus eight pages of appendices; for the second defendant the figure was 51 pages, plus six pages of appendices. There was, in fact, no significant issue between the two defendants; the provision of two separate skeletons of such length making similar points was singularly unhelpful.

This was a case with a time estimate of six days including two days for pre-reading. The issue at stake was the enforcement of the terms of an employment contract for something less than three months. The overriding objective, set out in CPR 1.1(2), directs the court to ensure that cases are dealt with “justly and at proportionate cost”. That includes allotting to the case “an appropriate share of the court’s resources”. As I made clear to the parties at the commencement of this hearing, skeleton arguments of the length described above, in a case such as this, are inconsistent with that overriding objective. The skill in drafting a skeleton argument lies in the production of a concise outline of the essential elements of the argument which is to be developed orally in court.

It is evident that the authors of the skeletons in the present case were proceeding on the assumption that they could demand of the court such judicial time as they thought necessary. In that they were mistaken. The length of the written argument means that the vast bulk of such pre-reading time as was allowed had to be devoted to reading them, rather than underlying documents. In fact, in this case, the length and complexity of the written argument served to obfuscate the real issues in the case. In truth, these were not skeleton arguments at all; the arguments contained in these documents were fully fleshed out and dressed in much unnecessary finery.

I indicated at the beginning of these proceedings that I was minded to disallow a substantial part of the costs of preparing the skeleton arguments. I will, of course, hear submissions on that issue, but that remains my preliminary view.

In addition to the excessive skeleton arguments, I was presented with a grossly excessive volume of documentation. The primary bundles for use in court ran to 13 volumes. I also received a further 44 lever arch files of allegedly confidential documentation. Of the 14,000 pages of documentation in the confidential files, I was referred at the hearing to less than 100. I was also provided with six volumes of authorities.

The provision of that sort of volume of material in a four day case is absurd. It too is contrary to the overriding objective. It betrays a failure by those acting for all the parties to adopt a sensible and constructive approach to preparation. My current view, again subject to submissions at the handing down of this judgment, is that a substantial part of the costs of producing or agreeing this vast quantity of material should also be disallowed.

In order to make this hearing manageable, I gave a series of case management directions on the first morning of the trial. First, I required the parties to file and serve an agreed list of issues. Second, I directed the provision of summary statements of case which were to run to no more than twenty pages each. Third, I directed the production of a schedule setting out where the parties’ cases could be found in the skeleton argument on each of the agreed issues. Fourth, I directed the production of an agreed glossary to help the court with the forest of acronyms employed in the documentation.

I record here my gratitude to all the parties for their work over the following weekend in producing that material on time. The list of issues proved especially useful in ensuring that argument was directed to what really mattered. Whilst I seek to cover the topics identified in the list of issues in this judgment, I do not regard myself as bound to follow that structure. In fact, as will become apparent, my resolution of the critical issues has led me to deal with matters in a somewhat different way.

I also directed that closing submissions would be completed within a single day, but that I would permit brief, supplementary, written closing submissions if they were felt to be necessary. I received a 32 page document from Daniel Oudkerk QC on behalf of the claimant, a nine page document from Matthew Sheridan for the first defendant and a 30 page document from Paul Goulding QC for the second defendant.

During the course of the hearing, I expressed the provisional view that I might be assisted in understanding how the various businesses operated in practice by visiting their premises. As a result, and with the agreement of all parties, I was shown around the trading floors of ICAP and Tullett Prebon by ICAP’s in-house solicitor before court on the last day of the hearing. I was accompanied by junior counsel for all three parties. The visit lasted in total some 30 minutes. I express my thanks to all concerned.

At the end of the hearing I extended O’Farrell J’s interim injunctions until the handing down of this judgment.

I have read carefully all the various iterations of the parties’ cases. But I make it clear, at the start of this judgment, that I do not intend to address each of the numerous arguments set out in the skeleton arguments, summary cases and closing submissions. Were I to do so, this judgment would run for hundreds of pages and would not be delivered until after that period for which the permanent injunctions are sought, thus rendering the exercise pointless, at least for the purposes of this action. I propose to do no more than is strictly necessary to decide the case.

After a day of openings from the three lead counsel, I heard two days of oral evidence. I heard from Frederik Vogels, now the Chief Executive Officer (“CEO”) of Global Broking for Europe, Middle East and Africa for the TP ICAP group and CEO for ICAP Global Broking EMEA, and from Donald McClumpha CEO of Global Broking for TP ICAP and the Chief Executive for “iSwap”, and electronic trading platform for interest rate derivatives, both of whom were called by the claimant.

I then heard from two witnesses called on behalf of the defendants. First, I heard from Sean Windeatt, CEO of the BGC group of companies and a Board Member of the second defendant. Finally, I heard from the first defendant.

Given that both their witness statements and the transcripts of their evidence will be available if this matter were to go further, I do not attempt a summary of their evidence. I deal with aspects of that evidence in the discussion which follows. It suffices for the present for me to record my view that, save in one respect, all four were honest and reliable witnesses who were doing their best to assist me.

The one exception to that conclusion concerns certain answers the first defendant gave in cross-examination as to his memory of confidential matters about which he learned whilst working for the claimant. On this one topic I found the first defendant somewhat less than frank. There were moments when I felt he was trying to find answers which best suited his case, rather than simply providing his honest recollections. I return to that below.

It is convenient at this stage to identify the statutory provisions which were the subject of debate.

At the heart of this case are the Transfer of Undertakings (Protection of Employment) Regulations 2006 (SI 2006/246) (“TUPE”). These regulations implement Council Directive 2001/23/EC on the approximation of the law relating to business transfers. They revoke the 1981 Regulations. The material provisions are as follows.

“3.

A relevant transfer

(1)

These Regulations apply to—

(a)

a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity;

…

(2)

In this regulation “economic entity” means an organised

grouping of resources which has the objective of pursuing an

economic activity, whether or not that activity is central or

ancillary.

…

(4)

Subject to paragraph (1), these Regulations apply to—

(a)

public and private undertakings engaged in economic activities whether or not they are operating for gain;

(b)

a transfer or service provision change howsoever effected notwithstanding—

(i)

that the transfer of an undertaking, business or part of an undertaking or business is governed or effected by the law of a country or territory outside the United Kingdom or that the service provision change is governed or effected by the law of a country or territory outside Great Britain;

(ii)

that the employment of persons employed in the undertaking, business or part transferred or, in the case of a service provision change, persons employed in the organised grouping of employees, is governed by any such law;

(c)

a transfer of an undertaking, business or part of an undertaking or business … where persons employed in the undertaking, business or part transferred ordinarily work outside the United Kingdom.

…

(6)

A relevant transfer—

(a)

may be effected by a series of two or more transactions; and

(b)

may take place whether or not any property is transferred to the transferee by the transferor.

…

4.

Effect of relevant transfer on contracts of employment

(1)

Except where objection is made under paragraph (7), a relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the organised grouping of resources or employees that is subject to the relevant transfer, which would otherwise be terminated by the transfer, but any such contract shall have effect after the transfer as if originally made between the person so employed and the transferee.

(2)

Without prejudice to paragraph (1), but subject to paragraph (6), and regulations 8 and 15(9), on the completion of a relevant transfer—

(a)

all the transferor's rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee; and

(b)

any act or omission before the transfer is completed, of or in relation to the transferor in respect of that contract or a person assigned to that organised grouping of resources or employees, shall be deemed to have been an act or omission of or in relation to the transferee.

…

(7)

Paragraphs (1) and (2) shall not operate to transfer the contract of employment and the rights, powers, duties and liabilities under or in connection with it of an employee who informs the transferor or the transferee that he objects to becoming employed by the transferee.

(8)

Subject to paragraphs (9) and (11), where an employee so objects, the relevant transfer shall operate so as to terminate his contract of employment with the transferor but he shall not be treated, for any purpose, as having been dismissed by the transferor.

(9)

Subject to regulation 9, where a relevant transfer involves or would involve a substantial change in working conditions to the material detriment of a person whose contract of employment is or would be transferred under paragraph (1), such an employee may treat the contract of employment as having been terminated, and the employee shall be treated for any purpose as having been dismissed by the employer.”

The aim of Directive 2001/23/EC (the Acquired Rights Directive or “ARD”) is said to be “to provide for the protection of employees in the event of a change of employer, in particular, to ensure that their rights are safeguarded”. The material provisions of the Directive are as follows:

“Article 1

Mr Berry was employed by IMSL pursuant to a service agreement dated 10 May 2013. That service agreement incorporated Part 1 of ICAP’s employment handbook. He was employed as CEO of Global e-Commerce for the IGBB.

The relevant provisions of his employment contract are as follows. Clause 1 provides that:

“During his employment hereunder the employee agrees to serve the company and its group of companies as CEO Global e-Commerce subject to the provisions of this agreement in Part 1(the staff handbook)”

Clause 3 sets out the terms of the contract and the required notice:

“3.1

The Employment of Employee hereunder shall…..commence on 1 September 2013 (the commencement date)……”

3.2

The Employment of the Employee may be terminated by either party giving to the other not less than twelve months’ prior notice”

Under Clauses 4 and 5 Mr Berry was entitled to a salary of £250,000 (which was subsequently increased) and a bonus.

Clause 10 deals with garden leave and clause 11 with confidentiality. Clause 12 sets out restrictions during employment and following termination (known as post termination restrictions or “PTRs”). I set out relevant parts of clauses 10, 11 and 12 in the section of this judgment which deals with the second issue.

Clause 13 provides that “For the avoidance of doubt, the employee is employed by the Company and not any of the Group Companies”. Clause 15 contained an entire agreement clause.

The critical parts of the history are summarised in the opening paragraphs of this judgment. It is necessary to provide a little more detail.

On 11 November 2015 ICAP plc entered into a Share Purchase Agreement with Tullett Prebon plc by which it was agreed that ICAP plc would separate the commercial organisation of the IGBB so that it was capable of operating on a standalone basis. It was also agreed that ICAP plc would restructure the IGBB so that the companies by which it operated became subsidiaries of IGBHL. On that basis Tullett Prebon plc agreed to purchase a majority of the shares in IGBHL.

On 21 July 2016 the first and second defendants entered an agreement by which the first defendant agreed to take up partnership in the second defendant as soon as he was lawfully able to do so. On 22 July 2016 the first defendant resigned from the claimant by letter. On 26 July 2016 the claimant put the first defendant on garden leave pursuant to the garden leave clause.

On 17 October 2016 (and on a number of occasions thereafter) the first defendant wrote to the claimant to the effect that he considered that the acquisition of the IGBB by Tullett Prebon plc would amount to a transfer under TUPE, that he objected to his employment transferring (as he was entitled to do under reg.4(7)) and that, as a result, in his view, his employment would terminate pursuant to reg.4(8) TUPE when the transfer occurred.

On 30 December 2016, Tullett Prebon plc and ICAP plc completed the sale of the IGBB. Tullett Prebon was renamed TP ICAP plc.

On 7 February 2017 the first defendant notified the claimant that he believed that a TUPE transfer had taken place and that his employment therefore terminated that day by reason of his objection to the transfer of his employment. He confirmed that he would abide by the PTRs in his Service Agreement and that he would not start work elsewhere for 10 days.

On 24 February 2017 the claimant issued an application for an injunction to enforce garden leave. Three days later, on 27 February 2017, the first defendant started work for the second defendant. As noted above, on 3 March 2017 O’Farrell J granted an injunction in the claimant’s favour and ordered that there be an expedited trial, whereupon the first defendant ceased his work with the second defendant.

Three substantive issues arise in this case, first, the application of TUPE, second, the enforcement of garden leave, and third the alleged inducement by, and the injunctive relief sought against, the second defendant. I deal with each in turn.

Citing Kelman v Care Services [1995] ICR 260, Mr Goulding contends that TUPE is to be interpreted in conformity with the Directive, and construed purposively, flexibly and focusing on substance not form. He says the situation should be viewed from an employment perspective and not one conditioned by principles of property, company or insolvency law. I agree and adopt that approach hereafter.

It is the claimant’s case that TUPE has no application to this case. Mr Oudkerk argues that the claimant has been the first defendant’s employer since he commenced work under the contract of employment and that he remains an employee of IMSL, notwithstanding the sale of the shares in IGBHL to Tullett Prebon plc. He says that all of the IGBB employees prior to the transaction remain employed by the claimant. TUPE, he says, requires a change of employer and there has been none.

The first defendant contends that he was employed by an “undertaking” or “business”’ or part thereof which transferred to TP ICAP plc pursuant to TUPE when, following the acquisition of the IGBB, TP ICAP plc assumed control of the activities of that undertaking. The first defendant puts his case on what amounted to the “undertaking” in three different ways. It was either the claimant or the IGBB, or the Global e-Commerce division of the IGBB. He says he was entitled to object to the transfer of his employment under TUPE. The consequence is that his employment ended on 7 February 2017 and the claimant was not (and is not) entitled to enforce garden leave thereafter since the contract of employment has terminated.

It is the second defendant’s case that, on or soon after, the transaction of 30 December 2016, there was a transfer of an economic entity which retained its identity. The second defendant’s suggest three similar candidates for the business entity which was transferred, namely the IGBB and/or the Global e-Commerce division and/or the business of the claimant. The second defendant argues that in accordance with the test in Millam, a case to which I will return, the business in which the first defendant was employed was transferred from ICAP and/or the IGBB subsidiaries, to TP ICAP plc, alongside the share transfer. They say that the first defendant objected to the transfer, as a result of which the transfer terminated his contract of employment with the claimant with effect from either the 30 December 2016 or 7 February 2017.

It is convenient to deal with the first three sub issues identified by the parties in the order set out in the list of issues.

Was IMSL or the business of IMSL an “economic entity” within the meaning of reg.3(2) ?

All three parties cite the judgment of Lindsay J in Cheesman v R Brewer Contracts Ltd [2001] I.R.L.R. 144 on the identification of an “economic entity” under the Regulations. At paragraph 10, Lindsay J said:

“(i)

As to whether there is an undertaking, there needs to be found a stable economic entity whose activity is not limited to performing one specific works contract, an organised grouping of persons and of assets enabling (or facilitating) the exercise of an economic activity which pursues a specific objective — Sanchez Hidalgo paragraph 25; Allen paragraph 24 and Vidal para 6 (which, confusingly, places the reference to “an economic activity” a little differently). It has been held that the reference to “one specific works contract” is to be restricted to a contract for building works — see Argyll Training infra EAT at paras 14–19.

(ii)

In order to be such an undertaking it must be sufficiently structured and autonomous but will not necessarily have significant assets, tangible or intangible — Vidal paragraph 27; Sanchez Hidalgo paragraph 26.

(iii)

In certain sectors such as cleaning and surveillance the assets are often reduced to their most basic and the activity is essentially based on manpower — Sanchez Hidalgo paragraph 26.

(iv)

An organised grouping of wage-earners who are specifically and permanently assigned to a common task may in the absence of other factors of production, amount to an economic entity — Vidal paragraph 27; Sanchez Hidalgo paragraph 26.

(v)

An activity of itself is not an entity; the identity of an entity emerges from other factors such as its workforce, management staff, the way in which its work is organised, its operating methods and, where appropriate, the operational resources available to it — Vidal paragraph 30; Sanchez Hidalgo paragraph 30; Allen paragraph 27.”

The claimant acknowledges that both the IGBB and Global e-Commerce were economic entities. Its position on the question of whether the claimant was an economic entity was curiously opaque.

It is common ground that TUPE applies only to the transfer of a business or undertaking which is an economic entity and that “economic entity” is defined as “an organised grouping of resources which has the objective of pursuing an economic activity whether or not that activity is central or ancillary”. It was not until his closing submissions that Mr Oudkerk properly addressed the question whether his client, the claimant, was such an economic entity. Even then I had to press him to provide an answer to that question and an answer only emerged after prolonged discussion between Mr Oudkerk and his juniors, Ms Jane McCafferty and Mr Edward Brown. Eventually he acknowledged that IMSL, at least if considered as a whole, is indeed an economic entity.

In my judgment, that concession was inevitable and should have been made at the beginning of these proceedings. The claimant was a UK company with its own board of directors. It filed an annual return and financial statement. It pursued the economic activity of providing the services of skilled employees within the ICAP group to the IGBB. It had its own management and administrative structures. It employed human resources staff with the expertise to manage the recruitment and employment of staff. It operated its own payroll services. It is true to say that it was a subsidiary company within a group of companies. But that does not prevent it being an economic entity for the purposes of TUPE.

In my judgment, it does not much matter if the economic entity is seen as the claimant company itself or its business.

Were IGBB and Global e-Commerce “situated immediately before the transfer in the United Kingdom” for the purposes of reg.3(1)(a) TUPE

Regulation 3(1)(a) TUPE requires, for the application of the regulations, that the undertaking, business or part of an undertaking or business must be “situated immediately before the transfer in the United Kingdom”. The claimant argues that what it is that must be situated in the United Kingdom is the economic entity which is transferred. Mr Oudkerk argues that that requirement emerges from reg.3(1)(a).

In response, Mr Goulding, with whom Mr Sheridan agrees, argues that in order to be situated in the United Kingdom an economic entity need not be wholly in the United Kingdom. Both the claimant and second defendant contend that their interpretation of reg.3(1)(a) is supported by the provision of reg.3(4) which provides that the regulations apply when persons employed in the business transferred “ordinarily work outside the United Kingdom” and notwithstanding that the employment of persons employed in the business is governed by foreign law. Mr Oudkerk contends that “these particular and limited provisions for foreign employment serve to underscore the general territorial limit of TUPE”. Mr Goulding argues that those provisions serve to emphasise that a global business can be situated in the UK.

In my judgment Mr Goulding is right on this issue too. I see nothing in reg.3 to indicate that an economic entity falls outside of the regulation unless it is wholly situated in the UK. If Mr Oudkerk were correct the fact that a business substantially based in the UK had, for genuine commercial reasons, set up a small office elsewhere in the world would mean that TUPE had no application to the vast majority of its employees working in the UK. In my view that cannot be right.

Was there a transfer to another person of an economic entity which retained its identity within the meaning of reg.3(1)(a) ?

Mr Oudkerk’s case is straightforward; whatever economic entity is being considered, there was no transfer falling within TUPE. He says that the first defendant was, and remains, an employee of the claimant.

Mr Goulding, who in substance advanced the argument on this issue on behalf of both defendants, contends that there was a transfer of the business of IGBB, Global e-Commerce or IMSL, from ICAP plc to TP ICAP plc. He argues that the company which formally operated the IGBB, namely ICAP plc, and its CEO (Mr Spencer) have “left the scene” and its executive management structure for operating IGBB has been closed down. He says that management and those structures have been replaced by the management and structures of TP ICAP plc. He says IGBB, Global e-Commerce and IMSL all retain their identities following the transfer.

The second defendant’s primary case is that the transferor was ICAP plc. Alternatively it is said that the transferor was IGBHL. Mr Goulding says that as far as IMSL and its business is concerned, the transferor was either ICAP plc, as the ultimate owner of IMSL, or IMSL itself. He contends that the transferee was TP ICAP plc and he argues that the date of the transfer was the date of the acquisition, namely 30 December 2016, or in the alternative that it had taken place by 7 February 2017, the date on which the first defendant treated his employment as terminated.

He says that it is possible to regard the company to which the employee is assigned as the employer and transferor within the meaning of the Directive, notwithstanding the fact that the employee’s contract of employment is with another company in the same group. Consistent with his over-arching submission that it is necessary to adopt a purposive construction, Mr Goulding argues that in group company arrangements, it is not uncommon for employees to enter into a contract of employment with a service company and be assigned to work for a business operated by other companies in the group. He says that the courts have held that it is necessary to interpret the Directive, and national law, purposively in these circumstances, to ensure that employees are protected and their rights safeguarded.

In my judgment, to answer the question whether there was here a transfer of one of the economic entities identified in the previous section of this judgment from one person to another it is necessary to consider five issues:

In Governing Body of Clifton Middle School v Askew [2000] ICR 286 the Court of Appeal had held that the relevant employees had to be employees of the transferor. Peter Gibson LJ said:

“It is not in dispute that an employee relationship is covered as well as a contract of employment but what is in dispute is whether that must be a contractual relationship…. In my judgment it is clear that the Regulations of 1981 proceed on the basis that there must be a contract. One gets that from the application of the ejusdem generis rule to “contract of service or apprenticeship or otherwise” in the definition of “employee”, from the definition of “contract of employment” as meaning any agreement between an employee and his employer determining the terms and conditions of his employment, and from regulation 5 (1) which proceeds on the footing that there will be a contract of employment of a person employed by the transferor in the undertaking or part transferred.”

However, EU case law has produced a different result on that issue. In Albron Catering BV v FNV Bondgenoten [2011] ICR 373, the CJEU was concerned with an employee who was permanently seconded to a group company which company directly assumed responsibility for his employment. The CJEU held that it was possible to regard as “transferor”, the group company to which the employees were assigned, notwithstanding that they were not linked to that company by a contract of employment. At paragraph 26 the Court held:

“Directive 2001/23 does not prevent the non-contractual employer, to which employees are assigned on a permanent basis, from being likewise capable of being regarded as a “transferor”, within the meaning of Directive 2001/23” (my emphasis).

At paragraph 32 the court said:

“The answer to the questions referred must therefore be that, in the event of a transfer, within the meaning of Directive 2001/23 , of an undertaking belonging to a group to an undertaking outside that group, it is also possible to regard as a “transferor”, within the meaning of article 2(1)(a) of that Directive, the group company to which the employees were assigned on a permanent basis without however being linked to the latter by a contract of employment, even though there exists within that group an undertaking with which the employees concerned were linked by such a contract of employment” (my emphasis).

It follows from that case that the absence of a contractual relationship between transferor and employee is not necessarily fatal to the application of the regulations. However, it is clear that that interpretation applies only if the assignment is permanent. The CJEU was careful to emphasise the need for permanent assignment if this analysis of the Directive was to be applicable.

It is the claimant’s case that the first defendant was employed by IMSL and assigned by them to IGBB or Global e-Commerce. In response, the defendants contend that the claimant was employed by ICAP plc for the purposes of reg.4(1). I am wholly unpersuaded by the defendants’ arguments on that issue.

First, the starting point has to be the contract. Clause 13.1 of the employment contract provides that Mr Berry is employed by IMSL and not any Group Company, and clause 15.1 contains an entire agreement clause.

Second, in my judgment, the defendants’ argument on the regulations takes them nowhere. Mr Goulding points to the fact that “employee” is defined in the Regulations as “any individual who works for another person whether under a contract of service or apprenticeship or otherwise……” He says the first defendant satisfied that definition. He says the first defendant worked for ICAP plc under a contract of service between the claimant and the first defendant. He says the contract of service does not have to be between the employee and the transferor; there can be a contract of service between A and B under which B agrees to work for C. But, I have seen no evidence of a contract of service between the claimant and the first defendant pursuant to which the first defendant agreed to work for ICAP Plc. In my view, Mr Goulding is here advancing an artificial construct.

Third, it is suggested in the alternative that the first defendant worked for ICAP plc “otherwise” than pursuant to a contract of service. Mr Goulding argues that ICAP plc was the first defendant’s non-contractual employer as that expression was explained in Albron. I have heard or seen no evidence to support a suggestion that the first defendant was permanently assigned by the claimant to work for the parent company ICAP plc.

In my judgment, the contractual position, pursuant to which the first defendant was employed by the claimant, represents the reality. There was an assignment of the first defendant in practice, but that was the assignment asserted by the claimant, namely from IMSL, the claimant, to IGBB and Global e-Commerce.

It is plain that for the regulations to apply, there has to be a change in the person who is carrying out the business and who bears responsibility as employer. That is explicit in the Directive. In Berg V Besselsen [1990] ICR 396 the CJEU held:

“where, following a legal transfer or merger, there is a change in the legal or natural person who is responsible for carrying on the business and who by virtue of that fact incurs the obligations of an employer vis-à-vis the employees of the undertaking, regardless of whether or not ownership of the undertaking is transferred” (my emphasis).

In CLECE SA v Martin Valor (C-463/09) [2011] 2 C.M.L.R. 30 at [30] the Court held:

“that the [ARD] is applicable wherever, in the context of contractual relations, there is a change in the legal or moral person who is responsible for carrying on the undertaking and who incurs the obligations of an employer towards employees of the undertaking”(my emphasis).

The need for there to be a change in employer is also implicit in the regulations. In Brookes v Borough Care Services [1998] ICR 1198, the applicants were employed by a local authority in care homes for the elderly. The local authority established a company limited by guarantee and transferred the homes, and the applicants' employment, to it. Three years later, an industrial and provident society expressed an interest in taking over the homes, but felt that, in order to put them on a sound financial footing, it would be essential to renegotiate the applicants' terms and conditions of employment. Thereafter the members of the company limited by guarantee resigned and were replaced by the industrial and provident society whose members became the directors of the company. The applicants were then required to accept new, less favourable, terms and conditions of employment.

At 1211B-C the Court of Appeal held:

“The Regulations and the Directive refer quite specifically to the change of employer and to a transferor and transferee being any natural or legal person.”

It is necessary therefore to look to see if there was a change of employer.

The Court went on in Brookes to observe that the directive and the regulations:

“could have addressed, but did not, the circumstances in which there was no transfer from a legal person to another legal person, but the shareholding membership of the legal person changed though its separate legal identity remained untouched.”

It follows from that, that a change of ownership of the shares of an employer will not necessarily mean a transfer has occurred; the same body may continue to carry out the business and bear responsibility as employer. But although a change of ownership will not necessarily result in a relevant transfer, it might do.

Brookes was followed by the Court of Appeal in Millam v Print Factory (London) 1991 Ltd[2007] ICR 1331. There a parent company sold the business of its subsidiary to a third party by way of a share sale agreement. Prior to the share sale the claimant was employed by the subsidiary. The question before the court was whether there had been a TUPE transfer. Buxton LJ (with whom Wilson and Moses LJJ agreed) said this:

“3 The question under TUPE is whether the business in which the claimant is employed has been transferred from one owner to another. That question is attended by some legal issues. For instance, it is well established, and accepted on all sides in this case, that a change in the legal control of the original corporate employer, such as occurs on a share sale of the kind that took place in this case, does not of itself transfer the business in TUPE terms. That was decided by the EAT in Brookes v Borough Care Services [1998] ICR 1198, a decision the correctness of which was not in issue before us. It is also well established that the mere fact that two companies are part of the same group, or that one company is the parent of another, does not of itself mean that the one company controls the business of the other. That is inherent in the decision of the Court of Justice in Case C-234/98 [1999] ECR I-8643 (Allen) . However, those rules as to what does not constitute a transfer under the TUPE Regulations are merely reminders that the question is whether as a matter of fact the business in which the claimant is employed has been transferred from one company to another.” (Emphasis Added)

Brookes and Millam were followed in Jackson Lloyd Ltd and Mears Group plc v Smith & Ors, UKEAT/0127/13, a case I return to below.

It follows that, in share transfer cases such as the present as much as in other cases, the crucial question is whether, as a matter of fact, the “business” in which the claimant was employed has been transferred from one company to another.

Buxton LJ continued at paragraph 9 to deal with the facts and the significance of the new legal structure:

“It is…correct to say that a subsidiary’s lack of independence does not demonstrate that the holding company owns the business. But that observation, when adopted as crucial to the decision in this case, does not give weight to the fact that the ET found, drawing on its experience, that the arrangements in the present case were not typical, to the extent that the business was that of McCorquodale. And the same has to be said of the observations that as a matter of law Fencourt was independent from McCorquodale; and that that concludes the matter in the absence of proof that Fencourt’s presence was a sham. The legal structure is of course important, but it cannot be conclusive in deciding the issue of whether, within that legal structure, control of the business has been transferred as a matter of fact. That was the conclusion of the ET, and the EAT demonstrated no proper basis for displacing that conclusion” (my emphasis).

Moses LJ, who agreed with Buxton LJ, identified potentially relevant features of a case where transfer had occurred:

“12.

The proposition that the transfer of shares in one company to another is not the same as the transfer of the business of the one to the other gives rise to the difficulty apparent in the instant case. Where, following a transfer of shares, a subsidiary is 100% owned by a parent, how can one tell whether the business has been transferred to the parent for the purposes of the TUPE Regulations? It is that, sometimes difficult, question of fact which must be resolved deploying the experience and expertise of the employment tribunal.

13.

The mere fact of control, which will follow from the relationship between parent and subsidiary, will not be sufficient to establish the transfer of the business from subsidiary to parent. There will often be little to distinguish between the case of transfer of control on acquisition by a new parent and transfer of the business to a new parent. Faced with such difficulties, the employment tribunal, is not entitled to indulge in the industrial equivalent of a Gallic shrug.

14.

In the instant case the employment tribunal identified a number of evidential indications, which, in combination, established that control of the business, in the sense of how its day-to-day activities were run, had passed from Fencourt to McCorquodale” (my emphasis).

In Jackson Lloyd Ltd MG was the parent company of a subsidiary, ML. Jackson Lloyd (“JL”) was a company whose business was the repair and maintenance of social housing. ML purchased all the shares in JL. Thereafter, JL’s board was immediately replaced by nominees of MG, MG announced that it had acquired JL (through its subsidiary, ML) and was embarking on a programme of integration, MG’s CEO appointed an “integration consultant and dismissed JL’s CEO, MG imposed major change on JL without JL holding any board meetings and without reference to JL’s internal mechanisms for effecting change. It was held that control was exercised by MG, not JL or ML even though to the outside world JL would appear to be autonomous and in competition with MG.

The EAT upheld the ET’s decision that there had been a TUPE transfer. Cox J reiterated that a share transfer is not in itself a TUPE transfer, but may occasion such a transfer. Cox J said:

“30.

That the Tribunal understood the task required of them and applied the test correctly is in our view clear from their findings of fact and reasoned conclusions. On 1 October 2010 and upon the share purchase by ML, MG announced that it had acquired JL and that it was embarking on a process of integration. A team of integration managers and staff arrived on site that same day. The Tribunal were in our view entitled to take into account what happened after 1 October, having regard to that clear statement of intent and the arrival of the integration team on 1 October.”

I accept that the question whether the transferred business has been integrated into the transferee’s operation is a relevant factor, potentially a highly relevant factor. But in my judgment it is not, taken alone, the test.

What, in my judgment, emerges from the CJEU cases of Berg v Besselsen and CLECE SA v Martin Valor, cited above and from the Court of Appeal’s decision in Millam is that the critical elements of the test are whether the new party (i) has become responsible for carrying on the business, (ii) has incurred the obligations of employer and (iii) has taken over day to day running of the business. It seems to me that those elements of the test can be captured in more colloquial terms – “Has the new party stepped into the shoes of the employer?”

I agree with Mr Goulding that in addressing these questions it is necessary to adopt an employment prospective rather than a commercial one. In my judgment, however, having identified the correct approach, Mr Goulding failed to apply it in his argument, concentrating his submissions on the high level machinery of governance of the new owners of IMSL, rather than the immediate role of employer and the perception of the employees.

The starting point has to be the contractual position. And that is unchanged. The first defendant was formerly a party to a contract of employment with the claimant. He remained a party to that contract after the transaction. It is of note that neither defendant suggests that the claimant has ceased to employ the first defendant.

In practice, prior to the transaction, the defendant worked, on a day to day basis as Chief Executive Officer of Global e-Commerce. After the transaction he worked in the same role for the same organisation. He worked from the same premises; he did the same job; he had the same clients; he was responsible for the same staff; he answered to the same immediate management.

It is the defendants’ case that following the transaction a new parent company, namely TP ICAP plc, took control of the business in which Mr Berry worked and as a result became a new employer for TUPE purposes. It is impossible for the defendants to suggest that their acquisition of a controlling percentage of the shareholding in the first defendant’s employer of itself meant TP ICAP plc became the new employer. The defendants accept that the authorities set out above, notably Brookes and Millam, demonstrate that a simple acquisition of control of shares does not constitute a transfer within TUPE.

That transaction undoubtedly brought together ICAP and Tullett Prebon under common ownership at the level of the ultimate parent company. It is common ground that that transfer involved the introduction of oversight and strategic management across the enlarged corporate group. It is accepted by the claimant that measures were introduced with the intention of producing costs-savings from economies of scale and rationalisation of support services. That meant that services such as legal or human resources, which were formerly provided in two separate corporate groups, were now to be provided in a single corporate structure. It is also agreed that the setting of strategic targets and the consolidation of systems and procedures were introduced to ensure consistency across the new group. But whichever economic entity is the focus of the inquiry, none of that establishes a change in employer in the sense identified above.

I turn to look at the particular factors which the defendants suggest evidence the transfer of the business of the IGBB from ICAP to TP ICAP and to the claimant’s response to those arguments.

Mr Goulding emphasises eight factors. First, he points to the separation of the IGBB from ICAP’s other business before completion of the acquisition. Second, he refers to the creation of a new TP ICAP brand including website, email and logo. Third, he refers to the replacement of ICAP’s governance and management structure by TP ICAP’s governance management structure. Fourth, he refers to the replacement of directors of the claimant and other IGBB subsidiaries with TP ICAP directors on the day of completion of the acquisition. Fifth, he refers to the integration of the IGBB into TP ICAP’s business, overseen as he says it was by an integration management office and involving, as he says it did, desk mergers, the integration of IT systems, global corporate functions systems, controls and broker compensation. Sixth, he refers to cost synergies from integration and redundancies. Seventh, he refers to changes in the employment terms and conditions of employees assigned to the IGBB. And, eighth, he refers to the fact that ICAP’s Global e-Commerce division is to be integrated with Tullett Prebon’s ebroking division to form a new e-market division.

In my judgment, Mr Oudkerk’s response to that argument is entirely convincing. At the level of their day to day management the businesses of the IGBB, Global e-Commerce and IMSL continue to be run in the same way as before the share sale. Changes taking place above the level of the day-to-day management (such as strategic targets, targets being set on a group wide basis) or behind the day to day management (such as de-duplications in corporate support services provided across the group) do not demonstrate a parent PLC intending to take over the management of day-to-day operations.

The separation of the IGBB from ICAP plc’s other businesses before the acquisition was a necessary legal step, because ICAP plc was only proposing to sell the IGBB and not its other divisions. In my judgment it does not demonstrate that the new owner has ‘stepped into the shoes’ of the existing employer. As Mr Oudkerk pointed out in his closing submissions, there was no cross-examination of Mr Vogels about the creation of a new TP ICAP brand and Mr Vogels provided convincing evidence that separate ICAP and Tullett Prebon websites, email addresses and logos continued to be used for day to day business.

I agree with Mr Oudkerk that the replacement of ICAP’s governance and management structures by the new company’s governance and management structures provides no assistance to Mr Goulding’s case. Those changes are the obvious manifestation of change in legal ownership. They say nothing about responsibility for the day-to-day business or the identity of the body who had incurred the obligations of employer.

The suggestion that directors of the claimant and other IGBB subsidiaries had been replaced with TP ICAP directors on the day of completion of the acquisition is not made out on the evidence I heard. I accept Mr Oudkerk’s argument that the evidence suggests that at least two directors of IMSL, namely Mr McClumpha and Mr Scard-Morgan, remained in place after 30 December 2016.

It is right that there was evidence of integration of the IGBB into TP ICAP’s business and that integration was overseen by an integration management office. That process was certainly not completed by the date of the transaction and, on the evidence I heard, was far from complete even by the date of trial. I was told by Mr Vogels that the two businesses, Tullett Prebon and ICAP, continue to be run from separate premises in the city. I visited them and it was apparent that both were busy, active offices. I was told, and I accept, that there had been no change in what the individual brokers working in those premises were doing between the period prior to the transaction and the present time.

The evidence I heard did not support the conclusion that there had been substantial mergers of ICAP and Tullett Prebon desks. It is right that I heard evidence from Mr Vogels that the IGBB closed two desks but I accept that that was pursuant to long standing concerns about profitability of those desks rather than an attempt to integrate ICAP and Tullett Prebon desks.

The suggestion that there has been integration of broker compensation between the two businesses was not borne out by the evidence. I heard evidence, which I accept, that there were directions from senior levels of the new company that efforts should be made across the group to aim at a reduction in broker compensation, but there was no evidence that broker compensation arrangements had been centralised or made uniform.

It is common ground that there were plans to integrate certain back office functions, but that process is far from complete. In any event, such a process is consistent, as Mr Oudkerk puts it, “with a parent company asking its subsidiaries to make cost savings”. It does not demonstrate that TP ICAP has become responsible for running the business of the IGBB or has incurred the obligations of employer of the staff of the IGBB or has taken over the day to day running of that business. “Cost synergies” presumably refers to the cost savings that will be made by integration of back office functions. The same points apply to that as to the factor discussed immediately above.

There was no evidence of changes to employment terms and conditions of employees assigned to the IGBB beyond answers from Mr Vogels to the effect that some staff had taken on additional responsibilities.

And, finally, I accept Mr Oudkerk’s submissions as to the integration of the two companies’ e-broking divisions. He referred to the evidence of Mr McClumpha who told me that the ICAP and Tullett Prebon, businesses remain intact and continue to function as they did before the merger. He told me that project managers could not operate for both ICAP and Tullett Prebon brands because there is competition between them. I accept that evidence.

Standing back from the detail, I was left with the clear impression from the evidence I heard and read that although the two companies, ICAP and Tullett Prebon now have a common ownership, they remain two distinct, competing brands. Furthermore, the conclusion I have drawn from the evidence is that the claimant, IMSL, continues to be responsible for its own business and continues to bear the obligations of employer of its staff, including the first defendant. Furthermore, in my judgment, the IGBB continues to be responsible for its business and its employees. There is no new owner who has stepped into the shoes of the claimant.

In those circumstances, in my judgment, there was no transfer to another person of an economic entity within the meaning of reg.3. It follows that there was no date of a relevant transfer and the first defendant was not employed under a contract of employment which otherwise would be terminated by transfer under reg.4(1). Accordingly there was nothing which the first defendant could object to within reg.4(7). In those circumstances the TUPE claim must fail.